Correlation Between Citigroup and Vanguard European

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

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

Diversification Opportunities for Citigroup and Vanguard European

-0.79

Correlation Coefficient

Citigroup  Vanguard European

Pay attention - limited upside

The 3 months correlation between Citigroup and Vanguard is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard European Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard European Stock 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 European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard European Stock has no effect on the direction of Citigroup i.e., Citigroup and Vanguard European go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard European

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.62 times more return on investment than Vanguard European. However, Citigroup is 1.62 times more volatile than Vanguard European Stock. It trades about -0.02 of its potential returns per unit of risk. Vanguard European Stock is currently generating about -0.22 per unit of risk. If you would invest  7,139  in Citigroup on October 1, 2024 and sell it today you would lose (39.00) from holding Citigroup or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Vanguard European Stock

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard European Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard European Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Citigroup and Vanguard European

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

The idea behind Citigroup and Vanguard European Stock 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.