Correlation Between Citigroup and Astellas Pharma

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

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

Diversification Opportunities for Citigroup and Astellas Pharma

-0.46

Correlation Coefficient

Citigroup  Astellas Pharma

Very good diversification

The 3 months correlation between Citigroup and Astellas is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Citigroup i.e., Citigroup and Astellas Pharma go up and down completely randomly.

Pair Corralation between Citigroup and Astellas Pharma

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.49 times more return on investment than Astellas Pharma. However, Citigroup is 1.49 times more volatile than Astellas Pharma. It trades about 0.02 of its potential returns per unit of risk. Astellas Pharma is currently generating about -0.1 per unit of risk. If you would invest  7,173  in Citigroup on December 5, 2024 and sell it today you would earn a total of  62.00  from holding Citigroup or generate 0.86% return on investment over 90 days.

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

Citigroup  vs.  Astellas Pharma

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Astellas Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astellas Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and Astellas Pharma

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

The idea behind Citigroup and Astellas Pharma 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.