Correlation Between Citigroup and Arch Biopartners

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

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

Diversification Opportunities for Citigroup and Arch Biopartners

-0.25

Correlation Coefficient

Citigroup  Arch Biopartners

Very good diversification

The 3 months correlation between Citigroup and Arch is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arch Biopartners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Biopartners 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 Arch Biopartners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Biopartners has no effect on the direction of Citigroup i.e., Citigroup and Arch Biopartners go up and down completely randomly.

Pair Corralation between Citigroup and Arch Biopartners

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.51 times more return on investment than Arch Biopartners. However, Citigroup is 1.97 times less risky than Arch Biopartners. It trades about 0.07 of its potential returns per unit of risk. Arch Biopartners is currently generating about -0.03 per unit of risk. If you would invest  7,186  in Citigroup on October 10, 2024 and sell it today you would earn a total of  140.00  from holding Citigroup or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Arch Biopartners

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Arch Biopartners

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Biopartners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Arch Biopartners is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Arch Biopartners

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

The idea behind Citigroup and Arch Biopartners 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.