Correlation Between Citigroup and Vulcan Steel

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

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

Diversification Opportunities for Citigroup and Vulcan Steel

-0.46

Correlation Coefficient

Citigroup  Vulcan Steel

Very good diversification

The 3 months correlation between Citigroup and Vulcan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel 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 Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of Citigroup i.e., Citigroup and Vulcan Steel go up and down completely randomly.

Pair Corralation between Citigroup and Vulcan Steel

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.55 times more return on investment than Vulcan Steel. However, Citigroup is 1.83 times less risky than Vulcan Steel. It trades about 0.12 of its potential returns per unit of risk. Vulcan Steel is currently generating about 0.0 per unit of risk. If you would invest  6,247  in Citigroup on September 19, 2024 and sell it today you would earn a total of  865.00  from holding Citigroup or generate 13.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Vulcan Steel

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vulcan Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Vulcan Steel

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

The idea behind Citigroup and Vulcan Steel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.