Correlation Between Citigroup and VanEck Vectors

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

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

Diversification Opportunities for Citigroup and VanEck Vectors

-0.66

Correlation Coefficient

Citigroup  VanEck Vectors

Excellent diversification

The 3 months correlation between Citigroup and VanEck is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of Citigroup i.e., Citigroup and VanEck Vectors go up and down completely randomly.

Pair Corralation between Citigroup and VanEck Vectors

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.5 times more return on investment than VanEck Vectors. However, Citigroup is 2.01 times less risky than VanEck Vectors. It trades about 0.1 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about -0.11 per unit of risk. If you would invest  7,186  in Citigroup on October 9, 2024 and sell it today you would earn a total of  182.00  from holding Citigroup or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  VanEck Vectors ETF

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

VanEck Vectors ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, VanEck Vectors 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 VanEck Vectors

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

The idea behind Citigroup and VanEck Vectors ETF 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.