Correlation Between Citigroup and VanEck Retail

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

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

Diversification Opportunities for Citigroup and VanEck Retail

0.84

Correlation Coefficient

Citigroup  VanEck Retail

Very poor diversification

The 3 months correlation between Citigroup and VanEck is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Retail ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Retail 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 Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Retail ETF has no effect on the direction of Citigroup i.e., Citigroup and VanEck Retail go up and down completely randomly.

Pair Corralation between Citigroup and VanEck Retail

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.09 times more return on investment than VanEck Retail. However, Citigroup is 2.09 times more volatile than VanEck Retail ETF. It trades about 0.01 of its potential returns per unit of risk. VanEck Retail ETF is currently generating about 0.0 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	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  VanEck Retail ETF

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 Retail ETF

Risk-Adjusted Performance

Weak

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

Pair Trading with Citigroup and VanEck Retail

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

The idea behind Citigroup and VanEck Retail 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.