Correlation Between Citigroup and BetterLife Pharma

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

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

Diversification Opportunities for Citigroup and BetterLife Pharma

-0.64

Correlation Coefficient

Citigroup  BetterLife Pharma

Excellent diversification

The 3 months correlation between Citigroup and BetterLife is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BetterLife Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetterLife 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 BetterLife Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetterLife Pharma has no effect on the direction of Citigroup i.e., Citigroup and BetterLife Pharma go up and down completely randomly.

Pair Corralation between Citigroup and BetterLife Pharma

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.32 times less return on investment than BetterLife Pharma. But when comparing it to its historical volatility, Citigroup is 5.88 times less risky than BetterLife Pharma. It trades about 0.16 of its potential returns per unit of risk. BetterLife Pharma is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8.50  in BetterLife Pharma on September 17, 2024 and sell it today you would lose (0.50) from holding BetterLife Pharma or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Citigroup  vs.  BetterLife Pharma

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

BetterLife Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetterLife Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BetterLife Pharma is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and BetterLife Pharma

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

The idea behind Citigroup and BetterLife 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.