Correlation Between Citigroup and Vanguard Federal

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

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

Diversification Opportunities for Citigroup and Vanguard Federal

0.62

Correlation Coefficient

Citigroup  Vanguard Federal

Poor diversification

The 3 months correlation between Citigroup and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vanguard Federal Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Federal Money 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 Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Federal Money has no effect on the direction of Citigroup i.e., Citigroup and Vanguard Federal go up and down completely randomly.

Pair Corralation between Citigroup and Vanguard Federal

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.99 times more return on investment than Vanguard Federal. However, Citigroup is 14.99 times more volatile than Vanguard Federal Money. It trades about 0.18 of its potential returns per unit of risk. Vanguard Federal Money is currently generating about 0.13 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Vanguard Federal Money

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.

Vanguard Federal Money

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Federal Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Vanguard Federal

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

The idea behind Citigroup and Vanguard Federal Money 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.