Correlation Between Citigroup and VanEck Sustainable

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

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

Diversification Opportunities for Citigroup and VanEck Sustainable

-0.28

Correlation Coefficient

Citigroup  VanEck Sustainable

Very good diversification

The 3 months correlation between Citigroup and VanEck is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Sustainable European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Sustainable 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 Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Sustainable has no effect on the direction of Citigroup i.e., Citigroup and VanEck Sustainable go up and down completely randomly.

Pair Corralation between Citigroup and VanEck Sustainable

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.36 times more return on investment than VanEck Sustainable. However, Citigroup is 2.36 times more volatile than VanEck Sustainable European. It trades about 0.06 of its potential returns per unit of risk. VanEck Sustainable European is currently generating about 0.06 per unit of risk. If you would invest  4,733  in Citigroup on September 27, 2024 and sell it today you would earn a total of  2,367  from holding Citigroup or generate 50.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.76%
Values	Daily Returns

Citigroup  vs.  VanEck Sustainable European

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

VanEck Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Sustainable European has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VanEck Sustainable is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and VanEck Sustainable

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

The idea behind Citigroup and VanEck Sustainable European 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.