Correlation Between Citigroup and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both Citigroup and Vanguard FTSE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Vanguard FTSE Developed, you can compare the effects of market volatilities on Citigroup and Vanguard FTSE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Vanguard FTSE.

Diversification Opportunities for Citigroup and Vanguard FTSE

-0.52

Correlation Coefficient

Citigroup  Vanguard FTSE

Excellent diversification

The 3 months correlation between Citigroup and Vanguard is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Citigroup i.e., Citigroup and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard FTSE

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.64 times more return on investment than Vanguard FTSE. However, Citigroup is 2.64 times more volatile than Vanguard FTSE Developed. It trades about 0.19 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.01 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,427  from holding Citigroup or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Vanguard FTSE Developed

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Vanguard FTSE

The main advantage of trading using opposite Citigroup and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Vanguard FTSE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.

The idea behind Citigroup and Vanguard FTSE Developed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.