Correlation Between Citigroup and VanEck IBoxx

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

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

Diversification Opportunities for Citigroup and VanEck IBoxx

0.8

Correlation Coefficient

Citigroup  VanEck IBoxx

Very poor diversification

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

Pair Corralation between Citigroup and VanEck IBoxx

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.07 times more return on investment than VanEck IBoxx. However, Citigroup is 6.07 times more volatile than VanEck iBoxx EUR. It trades about 0.12 of its potential returns per unit of risk. VanEck iBoxx EUR is currently generating about 0.12 per unit of risk. If you would invest  4,364  in Citigroup on September 14, 2024 and sell it today you would earn a total of  2,737  from holding Citigroup or generate 62.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.53%
Values	Daily Returns

Citigroup  vs.  VanEck iBoxx EUR

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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 iBoxx EUR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck iBoxx EUR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck IBoxx is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and VanEck IBoxx

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

The idea behind Citigroup and VanEck iBoxx EUR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.