Correlation Between Citigroup and Edwards Lifesciences

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

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

Diversification Opportunities for Citigroup and Edwards Lifesciences

0.69

Correlation Coefficient

Citigroup  Edwards Lifesciences

Poor diversification

The 3 months correlation between Citigroup and Edwards is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences has no effect on the direction of Citigroup i.e., Citigroup and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Citigroup and Edwards Lifesciences

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times more return on investment than Edwards Lifesciences. However, Citigroup is 1.39 times more volatile than Edwards Lifesciences. It trades about 0.23 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about -0.15 per unit of risk. If you would invest  7,149  in Citigroup on October 17, 2024 and sell it today you would earn a total of  678.00  from holding Citigroup or generate 9.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Edwards Lifesciences

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Edwards Lifesciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Edwards Lifesciences may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Edwards Lifesciences

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

The idea behind Citigroup and Edwards Lifesciences 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.