Correlation Between Citigroup and Optima Health

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

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

Diversification Opportunities for Citigroup and Optima Health

0.47

Correlation Coefficient

Citigroup  Optima Health

Very weak diversification

The 3 months correlation between Citigroup and Optima is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Health plc 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 Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Citigroup i.e., Citigroup and Optima Health go up and down completely randomly.

Pair Corralation between Citigroup and Optima Health

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.52 times more return on investment than Optima Health. However, Citigroup is 1.52 times more volatile than Optima Health plc. It trades about 0.13 of its potential returns per unit of risk. Optima Health plc is currently generating about 0.05 per unit of risk. If you would invest  6,092  in Citigroup on September 2, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.0%
Values	Daily Returns

Citigroup  vs.  Optima Health plc

Citigroup

Risk-Adjusted Performance

10 of 100

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.

Optima Health plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Optima Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Optima Health

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

The idea behind Citigroup and Optima Health plc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.