Correlation Between Citigroup and Lineage Cell

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

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

Diversification Opportunities for Citigroup and Lineage Cell

-0.7

Correlation Coefficient

Citigroup  Lineage Cell

Excellent diversification

The 3 months correlation between Citigroup and Lineage is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics 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 Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of Citigroup i.e., Citigroup and Lineage Cell go up and down completely randomly.

Pair Corralation between Citigroup and Lineage Cell

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.3 times less return on investment than Lineage Cell. But when comparing it to its historical volatility, Citigroup is 4.64 times less risky than Lineage Cell. It trades about 0.05 of its potential returns per unit of risk. Lineage Cell Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  21,370  in Lineage Cell Therapeutics on October 9, 2024 and sell it today you would lose (370.00) from holding Lineage Cell Therapeutics or give up 1.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

Citigroup  vs.  Lineage Cell Therapeutics

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Lineage Cell Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lineage Cell Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Lineage Cell

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

The idea behind Citigroup and Lineage Cell Therapeutics 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.