Correlation Between Citigroup and Vanguard Russell

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

By analyzing existing cross correlation between Citigroup and Vanguard Russell 2000, you can compare the effects of market volatilities on Citigroup and Vanguard Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Vanguard Russell.

Diversification Opportunities for Citigroup and Vanguard Russell

0.9

Correlation Coefficient

Citigroup  Vanguard Russell

Almost no diversification

The 3 months correlation between Citigroup and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of Citigroup i.e., Citigroup and Vanguard Russell go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard Russell

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.27 times more return on investment than Vanguard Russell. However, Citigroup is 1.27 times more volatile than Vanguard Russell 2000. It trades about 0.07 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.05 per unit of risk. If you would invest  4,219  in Citigroup on September 21, 2024 and sell it today you would earn a total of  2,623  from holding Citigroup or generate 62.17% return on investment over 90 days.

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

Citigroup  vs.  Vanguard Russell 2000

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Vanguard Russell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Vanguard Russell

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

The idea behind Citigroup and Vanguard Russell 2000 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.