Correlation Between Citigroup and Wave Life
Can any of the company-specific risk be diversified away by investing in both Citigroup and Wave Life 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 Wave Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Wave Life Sciences, you can compare the effects of market volatilities on Citigroup and Wave Life 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 Wave Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Wave Life.
Diversification Opportunities for Citigroup and Wave Life
Poor diversification
The 3 months correlation between Citigroup and Wave is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Wave Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Life Sciences 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 Wave Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Life Sciences has no effect on the direction of Citigroup i.e., Citigroup and Wave Life go up and down completely randomly.
Pair Corralation between Citigroup and Wave Life
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.45 times more return on investment than Wave Life. However, Citigroup is 2.22 times less risky than Wave Life. It trades about 0.21 of its potential returns per unit of risk. Wave Life Sciences is currently generating about 0.07 per unit of risk. If you would invest 6,393 in Citigroup on August 31, 2024 and sell it today you would earn a total of 623.00 from holding Citigroup or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Wave Life Sciences
Performance |
| Timeline |
| Citigroup |
| Wave Life Sciences |
Citigroup and Wave Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Wave Life
The main advantage of trading using opposite Citigroup and Wave Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Wave Life 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 Wave Life will offset losses from the drop in Wave Life's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Wave Life vs. Arrowhead Pharmaceuticals | Wave Life vs. CytomX Therapeutics | Wave Life vs. Assembly Biosciences | Wave Life vs. Apellis Pharmaceuticals |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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