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

-0.08

Correlation Coefficient

Citigroup  AbbVie

Good diversification

The 3 months correlation between Citigroup and AbbVie is -0.08. 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 15.0 times less return on investment than AbbVie. But when comparing it to its historical volatility, Citigroup is 1.49 times less risky than AbbVie. It trades about 0.02 of its potential returns per unit of risk. AbbVie Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,422  in AbbVie Inc on September 26, 2024 and sell it today you would earn a total of  510.00  from holding AbbVie Inc or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  AbbVie Inc

Citigroup

Risk-Adjusted Performance

10 of 100

Good

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

AbbVie Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, AbbVie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.