Correlation Between Citigroup and ESSA Pharma

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

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

Diversification Opportunities for Citigroup and ESSA Pharma

-0.88

Correlation Coefficient

Citigroup  ESSA Pharma

Pay attention - limited upside

The 3 months correlation between Citigroup and ESSA is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ESSA Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA 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 ESSA Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Pharma has no effect on the direction of Citigroup i.e., Citigroup and ESSA Pharma go up and down completely randomly.

Pair Corralation between Citigroup and ESSA Pharma

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.19 times more return on investment than ESSA Pharma. However, Citigroup is 5.33 times less risky than ESSA Pharma. It trades about 0.21 of its potential returns per unit of risk. ESSA Pharma is currently generating about -0.12 per unit of risk. If you would invest  5,683  in Citigroup on September 12, 2024 and sell it today you would earn a total of  1,567  from holding Citigroup or generate 27.57% return on investment over 90 days.

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

Citigroup  vs.  ESSA Pharma

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and ESSA Pharma

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

The idea behind Citigroup and ESSA 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 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.