Correlation Between Citigroup and 42225UAD6

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Can any of the company-specific risk be diversified away by investing in both Citigroup and 42225UAD6 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 42225UAD6 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and HEALTHCARE TR AMER, you can compare the effects of market volatilities on Citigroup and 42225UAD6 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 42225UAD6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and 42225UAD6.

Diversification Opportunities for Citigroup and 42225UAD6

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and 42225UAD6 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and HEALTHCARE TR AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHCARE TR AMER 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 42225UAD6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHCARE TR AMER has no effect on the direction of Citigroup i.e., Citigroup and 42225UAD6 go up and down completely randomly.

Pair Corralation between Citigroup and 42225UAD6

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.64 times more return on investment than 42225UAD6. However, Citigroup is 2.64 times more volatile than HEALTHCARE TR AMER. It trades about -0.02 of its potential returns per unit of risk. HEALTHCARE TR AMER is currently generating about -0.25 per unit of risk. If you would invest  8,051  in Citigroup on November 27, 2024 and sell it today you would lose (86.00) from holding Citigroup or give up 1.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy85.0%
ValuesDaily Returns

Citigroup  vs.  HEALTHCARE TR AMER

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.
HEALTHCARE TR AMER 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days HEALTHCARE TR AMER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 42225UAD6 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup and 42225UAD6 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and 42225UAD6

The main advantage of trading using opposite Citigroup and 42225UAD6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, 42225UAD6 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 42225UAD6 will offset losses from the drop in 42225UAD6's long position.
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The idea behind Citigroup and HEALTHCARE TR AMER 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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