Correlation Between Citigroup and Vanguard USD

Can any of the company-specific risk be diversified away by investing in both Citigroup and Vanguard USD 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 USD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Vanguard USD Emerging, you can compare the effects of market volatilities on Citigroup and Vanguard USD 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 USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Vanguard USD.

Diversification Opportunities for Citigroup and Vanguard USD

0.93

Correlation Coefficient

Citigroup  Vanguard USD

Almost no diversification

The 3 months correlation between Citigroup and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard USD Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Emerging 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 USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Emerging has no effect on the direction of Citigroup i.e., Citigroup and Vanguard USD go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard USD

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.82 times more return on investment than Vanguard USD. However, Citigroup is 3.82 times more volatile than Vanguard USD Emerging. It trades about 0.12 of its potential returns per unit of risk. Vanguard USD Emerging is currently generating about 0.13 per unit of risk. If you would invest  4,364  in Citigroup on September 15, 2024 and sell it today you would earn a total of  2,737  from holding Citigroup or generate 62.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

Citigroup  vs.  Vanguard USD Emerging

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard USD Emerging

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Emerging are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard USD is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Vanguard USD

The main advantage of trading using opposite Citigroup and Vanguard USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Vanguard USD 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 USD will offset losses from the drop in Vanguard USD's long position.

The idea behind Citigroup and Vanguard USD Emerging 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.