Correlation Between Citigroup and MorphoSys

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

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

Diversification Opportunities for Citigroup and MorphoSys

-0.24

Correlation Coefficient

Citigroup  MorphoSys

Very good diversification

The 3 months correlation between Citigroup and MorphoSys is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MorphoSys AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MorphoSys AG ADR 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 MorphoSys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MorphoSys AG ADR has no effect on the direction of Citigroup i.e., Citigroup and MorphoSys go up and down completely randomly.

Pair Corralation between Citigroup and MorphoSys

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.1 times more return on investment than MorphoSys. However, Citigroup is 9.98 times less risky than MorphoSys. It trades about 0.06 of its potential returns per unit of risk. MorphoSys AG ADR is currently generating about -0.18 per unit of risk. If you would invest  6,227  in Citigroup on September 29, 2024 and sell it today you would earn a total of  873.00  from holding Citigroup or generate 14.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.22%
Values	Daily Returns

Citigroup  vs.  MorphoSys AG ADR

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

MorphoSys AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MorphoSys AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MorphoSys is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and MorphoSys

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

The idea behind Citigroup and MorphoSys AG ADR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.