Correlation Between Citigroup and Australian Vanadium

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

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

Diversification Opportunities for Citigroup and Australian Vanadium

0.52

Correlation Coefficient

Citigroup  Australian Vanadium

Very weak diversification

The 3 months correlation between Citigroup and Australian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Australian Vanadium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Vanadium 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 Australian Vanadium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Vanadium has no effect on the direction of Citigroup i.e., Citigroup and Australian Vanadium go up and down completely randomly.

Pair Corralation between Citigroup and Australian Vanadium

Taking into account the 90-day investment horizon Citigroup is expected to generate 54.27 times less return on investment than Australian Vanadium. But when comparing it to its historical volatility, Citigroup is 11.88 times less risky than Australian Vanadium. It trades about 0.01 of its potential returns per unit of risk. Australian Vanadium Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.75  in Australian Vanadium Limited on December 30, 2024 and sell it today you would lose (0.25) from holding Australian Vanadium Limited or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Australian Vanadium Limited

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Australian Vanadium

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Vanadium Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Australian Vanadium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Australian Vanadium

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

The idea behind Citigroup and Australian Vanadium Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.