Correlation Between Citigroup and Opko Health

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

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

Diversification Opportunities for Citigroup and Opko Health

0.6

Correlation Coefficient

Citigroup  Opko Health

Poor diversification

The 3 months correlation between Citigroup and Opko is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of Citigroup i.e., Citigroup and Opko Health go up and down completely randomly.

Pair Corralation between Citigroup and Opko Health

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.86 times more return on investment than Opko Health. However, Citigroup is 1.17 times less risky than Opko Health. It trades about -0.04 of its potential returns per unit of risk. Opko Health is currently generating about -0.23 per unit of risk. If you would invest  7,186  in Citigroup on October 8, 2024 and sell it today you would lose (86.00) from holding Citigroup or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Opko Health

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Opko Health

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Opko Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Opko Health is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Opko Health

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

The idea behind Citigroup and Opko Health 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.