Correlation Between CVS Health and Citigroup

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

Diversification Opportunities for CVS Health and Citigroup

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CVS and Citigroup is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and CVS Health 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 CVS Health are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of CVS Health i.e., CVS Health and Citigroup go up and down completely randomly.

Pair Corralation between CVS Health and Citigroup

Assuming the 90 days trading horizon CVS Health is expected to generate 2.14 times more return on investment than Citigroup. However, CVS Health is 2.14 times more volatile than Citigroup. It trades about 0.16 of its potential returns per unit of risk. Citigroup is currently generating about -0.01 per unit of risk. If you would invest  5,343  in CVS Health on November 27, 2024 and sell it today you would earn a total of  698.00  from holding CVS Health or generate 13.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CVS Health  vs.  Citigroup

 Performance 
       Timeline  
CVS Health 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Citigroup 

Risk-Adjusted Performance

Good

 
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 fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVS Health and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CVS Health and Citigroup

The main advantage of trading using opposite CVS Health and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.
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The idea behind CVS Health and Citigroup 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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