Correlation Between Citigroup and DOD Biotech

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

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

Diversification Opportunities for Citigroup and DOD Biotech

-0.24

Correlation Coefficient

Citigroup  DOD Biotech

Very good diversification

The 3 months correlation between Citigroup and DOD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DOD Biotech Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOD Biotech Public 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 DOD Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOD Biotech Public has no effect on the direction of Citigroup i.e., Citigroup and DOD Biotech go up and down completely randomly.

Pair Corralation between Citigroup and DOD Biotech

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.76 times more return on investment than DOD Biotech. However, Citigroup is 1.32 times less risky than DOD Biotech. It trades about 0.32 of its potential returns per unit of risk. DOD Biotech Public is currently generating about -0.22 per unit of risk. If you would invest  6,235  in Citigroup on September 5, 2024 and sell it today you would earn a total of  915.00  from holding Citigroup or generate 14.68% return on investment over 90 days.

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

Citigroup  vs.  DOD Biotech Public

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.

DOD Biotech Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DOD Biotech Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, DOD Biotech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and DOD Biotech

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

The idea behind Citigroup and DOD Biotech Public 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..