Correlation Between Citigroup and AbbVie

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

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

Diversification Opportunities for Citigroup and AbbVie

-0.19

Correlation Coefficient

Citigroup  AbbVie

Good diversification

The 3 months correlation between Citigroup and AbbVie is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Citigroup i.e., Citigroup and AbbVie go up and down completely randomly.

Pair Corralation between Citigroup and AbbVie

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.95 times less return on investment than AbbVie. In addition to that, Citigroup is 1.45 times more volatile than AbbVie Inc. It trades about 0.03 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.18 per unit of volatility. If you would invest  17,455  in AbbVie Inc on December 29, 2024 and sell it today you would earn a total of  2,817  from holding AbbVie Inc or generate 16.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  AbbVie Inc

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AbbVie Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, AbbVie showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and AbbVie

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

The idea behind Citigroup and AbbVie Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.