Correlation Between Citigroup and PharmaEngine

Can any of the company-specific risk be diversified away by investing in both Citigroup and PharmaEngine 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 PharmaEngine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and PharmaEngine, you can compare the effects of market volatilities on Citigroup and PharmaEngine 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 PharmaEngine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and PharmaEngine.

Diversification Opportunities for Citigroup and PharmaEngine

-0.1

Correlation Coefficient

Citigroup  PharmaEngine

Good diversification

The 3 months correlation between Citigroup and PharmaEngine is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine 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 PharmaEngine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaEngine has no effect on the direction of Citigroup i.e., Citigroup and PharmaEngine go up and down completely randomly.

Pair Corralation between Citigroup and PharmaEngine

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.75 times more return on investment than PharmaEngine. However, Citigroup is 1.34 times less risky than PharmaEngine. It trades about 0.09 of its potential returns per unit of risk. PharmaEngine is currently generating about 0.01 per unit of risk. If you would invest  5,021  in Citigroup on October 7, 2024 and sell it today you would earn a total of  2,079  from holding Citigroup or generate 41.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.98%
Values	Daily Returns

Citigroup  vs.  PharmaEngine

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

PharmaEngine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PharmaEngine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PharmaEngine may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and PharmaEngine

The main advantage of trading using opposite Citigroup and PharmaEngine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, PharmaEngine 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 PharmaEngine will offset losses from the drop in PharmaEngine's long position.

The idea behind Citigroup and PharmaEngine 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.