Correlation Between Citigroup and Vulcan Materials

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

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

Diversification Opportunities for Citigroup and Vulcan Materials

0.51

Correlation Coefficient

Citigroup  Vulcan Materials

Very weak diversification

The 3 months correlation between Citigroup and Vulcan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Citigroup i.e., Citigroup and Vulcan Materials go up and down completely randomly.

Pair Corralation between Citigroup and Vulcan Materials

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.52 times more return on investment than Vulcan Materials. However, Citigroup is 1.52 times more volatile than Vulcan Materials. It trades about 0.41 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.27 per unit of risk. If you would invest  6,977  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Citigroup  vs.  Vulcan Materials

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Vulcan Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Vulcan Materials is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Vulcan Materials

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

The idea behind Citigroup and Vulcan Materials 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.