Correlation Between Citigroup and Faes Farma

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

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

Diversification Opportunities for Citigroup and Faes Farma

-0.83

Correlation Coefficient

Citigroup  Faes Farma

Pay attention - limited upside

The 3 months correlation between Citigroup and Faes is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Faes Farma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faes Farma SA 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 Faes Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faes Farma SA has no effect on the direction of Citigroup i.e., Citigroup and Faes Farma go up and down completely randomly.

Pair Corralation between Citigroup and Faes Farma

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Faes Farma. In addition to that, Citigroup is 1.16 times more volatile than Faes Farma SA. It trades about -0.06 of its total potential returns per unit of risk. Faes Farma SA is currently generating about 0.02 per unit of volatility. If you would invest  349.00  in Faes Farma SA on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Faes Farma SA or generate 0.29% return on investment over 90 days.

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

Citigroup  vs.  Faes Farma SA

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Faes Farma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faes Farma SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Faes Farma is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Faes Farma

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

The idea behind Citigroup and Faes Farma SA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.