Correlation Between Citigroup and Vanguard

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

By analyzing existing cross correlation between Citigroup and Vanguard SP 500, you can compare the effects of market volatilities on Citigroup and Vanguard 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Vanguard.

Diversification Opportunities for Citigroup and Vanguard

0.88

Correlation Coefficient

Citigroup  Vanguard

Very poor diversification

The 3 months correlation between Citigroup and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Citigroup i.e., Citigroup and Vanguard go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.19 times more return on investment than Vanguard. However, Citigroup is 2.19 times more volatile than Vanguard SP 500. It trades about 0.01 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.27 per unit of risk. If you would invest  6,095  in Citigroup on January 24, 2024 and sell it today you would earn a total of  0.00  from holding Citigroup or generate 0.0% return on investment over 90 days.

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

Citigroup  vs.  Vanguard SP 500

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 SP 500

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard 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

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

The idea behind Citigroup and Vanguard SP 500 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 Anywhere module to track or share privately all of your investments from the convenience of any device.