Correlation Between Citigroup and VanEck Oil

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

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

Diversification Opportunities for Citigroup and VanEck Oil

0.57

Correlation Coefficient

Citigroup  VanEck Oil

Very weak diversification

The 3 months correlation between Citigroup and VanEck is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Oil Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Services 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Services has no effect on the direction of Citigroup i.e., Citigroup and VanEck Oil go up and down completely randomly.

Pair Corralation between Citigroup and VanEck Oil

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.24 times more return on investment than VanEck Oil. However, Citigroup is 1.24 times more volatile than VanEck Oil Services. It trades about 0.01 of its potential returns per unit of risk. VanEck Oil Services is currently generating about -0.02 per unit of risk. If you would invest  6,991  in Citigroup on December 28, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  VanEck Oil Services

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.

VanEck Oil Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Oil Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, VanEck Oil is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and VanEck Oil

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

The idea behind Citigroup and VanEck Oil Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.