Correlation Between Citigroup and GUARDANT HEALTH

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

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

Diversification Opportunities for Citigroup and GUARDANT HEALTH

0.74

Correlation Coefficient

Citigroup  GUARDANT HEALTH

Poor diversification

The 3 months correlation between Citigroup and GUARDANT is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of Citigroup i.e., Citigroup and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between Citigroup and GUARDANT HEALTH

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.49 times less return on investment than GUARDANT HEALTH. But when comparing it to its historical volatility, Citigroup is 2.1 times less risky than GUARDANT HEALTH. It trades about 0.13 of its potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,303  in GUARDANT HEALTH CL on September 2, 2024 and sell it today you would earn a total of  1,015  from holding GUARDANT HEALTH CL or generate 44.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.97%
Values	Daily Returns

Citigroup  vs.  GUARDANT HEALTH CL

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

GUARDANT HEALTH CL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and GUARDANT HEALTH

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

The idea behind Citigroup and GUARDANT HEALTH CL 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.