Correlation Between Citigroup and Healthcare Services

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

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

Diversification Opportunities for Citigroup and Healthcare Services

-0.54

Correlation Coefficient

Citigroup  Healthcare Services

Excellent diversification

The 3 months correlation between Citigroup and Healthcare is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Healthcare Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Services 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 Healthcare Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Services has no effect on the direction of Citigroup i.e., Citigroup and Healthcare Services go up and down completely randomly.

Pair Corralation between Citigroup and Healthcare Services

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.84 times more return on investment than Healthcare Services. However, Citigroup is 1.19 times less risky than Healthcare Services. It trades about 0.25 of its potential returns per unit of risk. Healthcare Services Group is currently generating about -0.04 per unit of risk. If you would invest  6,781  in Citigroup on November 20, 2024 and sell it today you would earn a total of  1,680  from holding Citigroup or generate 24.78% return on investment over 90 days.

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

Citigroup  vs.  Healthcare Services Group

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Healthcare Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Healthcare Services Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Healthcare Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Healthcare Services

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

The idea behind Citigroup and Healthcare Services Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.