Correlation Between Citigroup and Vanguard Bond

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

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

Diversification Opportunities for Citigroup and Vanguard Bond

0.25

Correlation Coefficient

Citigroup  Vanguard Bond

Modest diversification

The 3 months correlation between Citigroup and Vanguard is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond Index 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 Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of Citigroup i.e., Citigroup and Vanguard Bond go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard Bond

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.59 times more return on investment than Vanguard Bond. However, Citigroup is 1.59 times more volatile than Vanguard Bond Index. It trades about 0.01 of its potential returns per unit of risk. Vanguard Bond Index is currently generating about -0.01 per unit of risk. If you would invest  6,991  in Citigroup on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.81%
Values	Daily Returns

Citigroup  vs.  Vanguard Bond Index

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.

Vanguard Bond Index

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Citigroup and Vanguard Bond

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

The idea behind Citigroup and Vanguard Bond Index 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.