Correlation Between Citigroup and Garofalo Health

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

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

Diversification Opportunities for Citigroup and Garofalo Health

-0.16

Correlation Coefficient

Citigroup  Garofalo Health

Good diversification

The 3 months correlation between Citigroup and Garofalo is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Garofalo Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garofalo Health Care 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 Garofalo Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garofalo Health Care has no effect on the direction of Citigroup i.e., Citigroup and Garofalo Health go up and down completely randomly.

Pair Corralation between Citigroup and Garofalo Health

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.59 times more return on investment than Garofalo Health. However, Citigroup is 1.59 times more volatile than Garofalo Health Care. It trades about 0.04 of its potential returns per unit of risk. Garofalo Health Care is currently generating about -0.13 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

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

Citigroup  vs.  Garofalo Health Care

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Garofalo Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and Garofalo Health

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

The idea behind Citigroup and Garofalo Health Care 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.