Correlation Between Citigroup and Medical Packaging

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

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

Diversification Opportunities for Citigroup and Medical Packaging

0.32

Correlation Coefficient

Citigroup  Medical Packaging

Weak diversification

The 3 months correlation between Citigroup and Medical is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging 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 Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of Citigroup i.e., Citigroup and Medical Packaging go up and down completely randomly.

Pair Corralation between Citigroup and Medical Packaging

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.31 times more return on investment than Medical Packaging. However, Citigroup is 1.31 times more volatile than Medical Packaging. It trades about 0.01 of its potential returns per unit of risk. Medical Packaging is currently generating about -0.06 per unit of risk. If you would invest  6,991  in Citigroup on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.61%
Values	Daily Returns

Citigroup  vs.  Medical Packaging

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Medical Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medical Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Medical Packaging 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 Medical Packaging

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

The idea behind Citigroup and Medical Packaging 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.