Correlation Between Citigroup and SP500 VIX

Can any of the company-specific risk be diversified away by investing in both Citigroup and SP500 VIX 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 SP500 VIX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and SP500 VIX Futures, you can compare the effects of market volatilities on Citigroup and SP500 VIX 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 SP500 VIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and SP500 VIX.

Diversification Opportunities for Citigroup and SP500 VIX

-0.8

Correlation Coefficient

Citigroup  SP500 VIX

Pay attention - limited upside

The 3 months correlation between Citigroup and SP500 is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SP500 VIX Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP500 VIX Futures 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 SP500 VIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP500 VIX Futures has no effect on the direction of Citigroup i.e., Citigroup and SP500 VIX go up and down completely randomly.

Pair Corralation between Citigroup and SP500 VIX

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.0 times more return on investment than SP500 VIX. However, Citigroup is 1.0 times more volatile than SP500 VIX Futures. It trades about 0.17 of its potential returns per unit of risk. SP500 VIX Futures is currently generating about -0.06 per unit of risk. If you would invest  5,877  in Citigroup on September 17, 2024 and sell it today you would earn a total of  1,224  from holding Citigroup or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  SP500 VIX Futures

Pair Trading with Citigroup and SP500 VIX

The main advantage of trading using opposite Citigroup and SP500 VIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, SP500 VIX 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 SP500 VIX will offset losses from the drop in SP500 VIX's long position.

The idea behind Citigroup and SP500 VIX Futures 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.