Correlation Between Citigroup and Vaughan Nelson

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

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

Diversification Opportunities for Citigroup and Vaughan Nelson

0.94

Correlation Coefficient

Citigroup  Vaughan Nelson

Almost no diversification

The 3 months correlation between Citigroup and Vaughan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vaughan Nelson Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Value 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 Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Value has no effect on the direction of Citigroup i.e., Citigroup and Vaughan Nelson go up and down completely randomly.

Pair Corralation between Citigroup and Vaughan Nelson

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.68 times more return on investment than Vaughan Nelson. However, Citigroup is 1.68 times more volatile than Vaughan Nelson Value. It trades about 0.07 of its potential returns per unit of risk. Vaughan Nelson Value is currently generating about 0.08 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	100.0%
Values	Daily Returns

Citigroup  vs.  Vaughan Nelson Value

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.

Vaughan Nelson Value

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vaughan Nelson Value are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vaughan Nelson 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 Vaughan Nelson

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

The idea behind Citigroup and Vaughan Nelson Value 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.