Correlation Between Citigroup and Alkermes Plc

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

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

Diversification Opportunities for Citigroup and Alkermes Plc

0.71

Correlation Coefficient

Citigroup  Alkermes Plc

Poor diversification

The 3 months correlation between Citigroup and Alkermes is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc 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 Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Citigroup i.e., Citigroup and Alkermes Plc go up and down completely randomly.

Pair Corralation between Citigroup and Alkermes Plc

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.15 times less return on investment than Alkermes Plc. But when comparing it to its historical volatility, Citigroup is 1.25 times less risky than Alkermes Plc. It trades about 0.25 of its potential returns per unit of risk. Alkermes Plc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,791  in Alkermes Plc on November 20, 2024 and sell it today you would earn a total of  798.00  from holding Alkermes Plc or generate 28.59% return on investment over 90 days.

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

Citigroup  vs.  Alkermes Plc

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Alkermes Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alkermes Plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Alkermes Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Alkermes Plc

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

The idea behind Citigroup and Alkermes Plc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.