Correlation Between Citigroup and GSK Plc

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

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

Diversification Opportunities for Citigroup and GSK Plc

-0.85

Correlation Coefficient

Citigroup  GSK Plc

Pay attention - limited upside

The 3 months correlation between Citigroup and GSK is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc 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 GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of Citigroup i.e., Citigroup and GSK Plc go up and down completely randomly.

Pair Corralation between Citigroup and GSK Plc

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.33 times more return on investment than GSK Plc. However, Citigroup is 3.07 times less risky than GSK Plc. It trades about 0.25 of its potential returns per unit of risk. GSK plc is currently generating about -0.04 per unit of risk. If you would invest  6,815  in Citigroup on September 15, 2024 and sell it today you would earn a total of  286.00  from holding Citigroup or generate 4.2% return on investment over 90 days.

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

Citigroup  vs.  GSK plc

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

GSK plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSK plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and GSK Plc

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

The idea behind Citigroup and GSK plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.