Correlation Between Citigroup and BridgeBio Pharma

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

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

Diversification Opportunities for Citigroup and BridgeBio Pharma

0.58

Correlation Coefficient

Citigroup  BridgeBio Pharma

Very weak diversification

The 3 months correlation between Citigroup and BridgeBio is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio 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 BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Citigroup i.e., Citigroup and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Citigroup and BridgeBio Pharma

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.47 times less return on investment than BridgeBio Pharma. But when comparing it to its historical volatility, Citigroup is 3.42 times less risky than BridgeBio Pharma. It trades about 0.07 of its potential returns per unit of risk. BridgeBio Pharma is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  815.00  in BridgeBio Pharma on October 10, 2024 and sell it today you would earn a total of  2,070  from holding BridgeBio Pharma or generate 253.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  BridgeBio Pharma

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.

BridgeBio Pharma

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and BridgeBio Pharma

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

The idea behind Citigroup and BridgeBio 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.