Correlation Between Citigroup and Vertex Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Citigroup and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Vertex Pharmaceuticals, you can compare the effects of market volatilities on Citigroup and Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Vertex Pharmaceuticals.
Diversification Opportunities for Citigroup and Vertex Pharmaceuticals
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citigroup and Vertex is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vertex Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceuticals 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 Vertex Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceuticals has no effect on the direction of Citigroup i.e., Citigroup and Vertex Pharmaceuticals go up and down completely randomly.
Pair Corralation between Citigroup and Vertex Pharmaceuticals
Given the investment horizon of 90 days Citigroup is expected to generate 1.4 times less return on investment than Vertex Pharmaceuticals. In addition to that, Citigroup is 1.14 times more volatile than Vertex Pharmaceuticals. It trades about 0.3 of its total potential returns per unit of risk. Vertex Pharmaceuticals is currently generating about 0.48 per unit of volatility. If you would invest 814,943 in Vertex Pharmaceuticals on November 9, 2024 and sell it today you would earn a total of 166,062 from holding Vertex Pharmaceuticals or generate 20.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Vertex Pharmaceuticals
Performance |
| Timeline |
| Citigroup |
| Vertex Pharmaceuticals |
Citigroup and Vertex Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Vertex Pharmaceuticals
The main advantage of trading using opposite Citigroup and Vertex Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Vertex Pharmaceuticals 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 Vertex Pharmaceuticals will offset losses from the drop in Vertex Pharmaceuticals' long position.| Citigroup vs. McEwen Mining | Citigroup vs. Southern Copper | Citigroup vs. Genworth Financial | Citigroup vs. KB Home |
| Vertex Pharmaceuticals vs. Capital One Financial | Vertex Pharmaceuticals vs. The Bank of | Vertex Pharmaceuticals vs. Delta Air Lines | Vertex Pharmaceuticals vs. GMxico Transportes SAB |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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