Correlation Between Citigroup and Vanguard Funds

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

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

Diversification Opportunities for Citigroup and Vanguard Funds

0.92

Correlation Coefficient

Citigroup  Vanguard Funds

Almost no diversification

The 3 months correlation between Citigroup and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard Funds PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds PLC 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds PLC has no effect on the direction of Citigroup i.e., Citigroup and Vanguard Funds go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard Funds

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.36 times more return on investment than Vanguard Funds. However, Citigroup is 3.36 times more volatile than Vanguard Funds PLC. It trades about 0.07 of its potential returns per unit of risk. Vanguard Funds PLC is currently generating about 0.1 per unit of risk. If you would invest  4,219  in Citigroup on September 23, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.22%
Values	Daily Returns

Citigroup  vs.  Vanguard Funds PLC

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Funds PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Vanguard Funds

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

The idea behind Citigroup and Vanguard Funds PLC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.