Correlation Between GlaxoSmithKline PLC and CITIGROUP

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Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC 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 GlaxoSmithKline PLC and CITIGROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and CITIGROUP INC 475, you can compare the effects of market volatilities on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC with a short position of CITIGROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and CITIGROUP.

Diversification Opportunities for GlaxoSmithKline PLC and CITIGROUP

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between GlaxoSmithKline and CITIGROUP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and CITIGROUP INC 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP INC 475 and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR 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 INC 475 has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and CITIGROUP go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and CITIGROUP

Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1.07 times less return on investment than CITIGROUP. In addition to that, GlaxoSmithKline PLC is 1.15 times more volatile than CITIGROUP INC 475. It trades about 0.01 of its total potential returns per unit of risk. CITIGROUP INC 475 is currently generating about 0.02 per unit of volatility. If you would invest  8,403  in CITIGROUP INC 475 on September 1, 2024 and sell it today you would earn a total of  454.00  from holding CITIGROUP INC 475 or generate 5.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.31%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  CITIGROUP INC 475

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

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Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
CITIGROUP INC 475 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days CITIGROUP INC 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITIGROUP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

GlaxoSmithKline PLC and CITIGROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and CITIGROUP

The main advantage of trading using opposite GlaxoSmithKline PLC and CITIGROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR and CITIGROUP INC 475 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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