Correlation Between Citigroup and ADMA Biologics

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

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

Diversification Opportunities for Citigroup and ADMA Biologics

0.49

Correlation Coefficient

Citigroup  ADMA Biologics

Very weak diversification

The 3 months correlation between Citigroup and ADMA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ADMA Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADMA Biologics 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 ADMA Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADMA Biologics has no effect on the direction of Citigroup i.e., Citigroup and ADMA Biologics go up and down completely randomly.

Pair Corralation between Citigroup and ADMA Biologics

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.23 times more return on investment than ADMA Biologics. However, Citigroup is 4.26 times less risky than ADMA Biologics. It trades about 0.25 of its potential returns per unit of risk. ADMA Biologics is currently generating about -0.13 per unit of risk. If you would invest  6,902  in Citigroup on September 13, 2024 and sell it today you would earn a total of  294.00  from holding Citigroup or generate 4.26% return on investment over 90 days.

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

Citigroup  vs.  ADMA Biologics

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

ADMA Biologics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADMA Biologics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ADMA Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and ADMA Biologics

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

The idea behind Citigroup and ADMA Biologics 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.