Correlation Between Pfizer and CITIGROUP

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Can any of the company-specific risk be diversified away by investing in both Pfizer 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 Pfizer and CITIGROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and CITIGROUP INC 6875, you can compare the effects of market volatilities on Pfizer 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 Pfizer with a short position of CITIGROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and CITIGROUP.

Diversification Opportunities for Pfizer and CITIGROUP

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Pfizer and CITIGROUP is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and CITIGROUP INC 6875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP INC 6875 and Pfizer 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 Pfizer Inc 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 6875 has no effect on the direction of Pfizer i.e., Pfizer and CITIGROUP go up and down completely randomly.

Pair Corralation between Pfizer and CITIGROUP

Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the CITIGROUP. In addition to that, Pfizer is 1.21 times more volatile than CITIGROUP INC 6875. It trades about -0.26 of its total potential returns per unit of risk. CITIGROUP INC 6875 is currently generating about 0.09 per unit of volatility. If you would invest  11,561  in CITIGROUP INC 6875 on August 25, 2024 and sell it today you would earn a total of  202.00  from holding CITIGROUP INC 6875 or generate 1.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy68.18%
ValuesDaily Returns

Pfizer Inc  vs.  CITIGROUP INC 6875

 Performance 
       Timeline  
Pfizer Inc 

Risk-Adjusted Performance

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Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
CITIGROUP INC 6875 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days CITIGROUP INC 6875 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pfizer and CITIGROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pfizer and CITIGROUP

The main advantage of trading using opposite Pfizer and CITIGROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer 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 Pfizer Inc and CITIGROUP INC 6875 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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