Correlation Between Citigroup and Innate Pharma

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

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

Diversification Opportunities for Citigroup and Innate Pharma

0.41

Correlation Coefficient

Citigroup  Innate Pharma

Very weak diversification

The 3 months correlation between Citigroup and Innate is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Innate Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innate 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 Innate Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innate Pharma has no effect on the direction of Citigroup i.e., Citigroup and Innate Pharma go up and down completely randomly.

Pair Corralation between Citigroup and Innate Pharma

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.83 times less return on investment than Innate Pharma. But when comparing it to its historical volatility, Citigroup is 2.91 times less risky than Innate Pharma. It trades about 0.13 of its potential returns per unit of risk. Innate Pharma is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  137.00  in Innate Pharma on December 1, 2024 and sell it today you would earn a total of  76.00  from holding Innate Pharma or generate 55.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  Innate Pharma

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Innate Pharma

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innate Pharma are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Innate Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Innate Pharma

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

The idea behind Citigroup and Innate 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.