Correlation Between Citigroup and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both Citigroup and VanEck Oil 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 Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and VanEck Oil Services, you can compare the effects of market volatilities on Citigroup and VanEck Oil 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 Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and VanEck Oil.
Diversification Opportunities for Citigroup and VanEck Oil
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and VanEck is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Oil Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Services 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Services has no effect on the direction of Citigroup i.e., Citigroup and VanEck Oil go up and down completely randomly.
Pair Corralation between Citigroup and VanEck Oil
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.12 times more return on investment than VanEck Oil. However, Citigroup is 1.12 times more volatile than VanEck Oil Services. It trades about 0.08 of its potential returns per unit of risk. VanEck Oil Services is currently generating about 0.02 per unit of risk. If you would invest 4,091 in Citigroup on September 14, 2024 and sell it today you would earn a total of 3,029 from holding Citigroup or generate 74.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 76.36% |
| Values | Daily Returns |
Citigroup vs. VanEck Oil Services
Performance |
| Timeline |
| Citigroup |
| VanEck Oil Services |
Citigroup and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and VanEck Oil
The main advantage of trading using opposite Citigroup and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, VanEck Oil 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 Oil will offset losses from the drop in VanEck Oil's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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