Correlation Between Citigroup and Farmaceutica

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Farmaceutica 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 Farmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Farmaceutica R, you can compare the effects of market volatilities on Citigroup and Farmaceutica 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 Farmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Farmaceutica.

Diversification Opportunities for Citigroup and Farmaceutica

-0.84
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Citigroup and Farmaceutica is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Farmaceutica R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmaceutica R 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 Farmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmaceutica R has no effect on the direction of Citigroup i.e., Citigroup and Farmaceutica go up and down completely randomly.

Pair Corralation between Citigroup and Farmaceutica

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.94 times less return on investment than Farmaceutica. But when comparing it to its historical volatility, Citigroup is 2.24 times less risky than Farmaceutica. It trades about 0.04 of its potential returns per unit of risk. Farmaceutica R is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Farmaceutica R on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Farmaceutica R or generate 3.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Citigroup  vs.  Farmaceutica R

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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.
Farmaceutica R 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Farmaceutica R has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Citigroup and Farmaceutica Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Farmaceutica

The main advantage of trading using opposite Citigroup and Farmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Farmaceutica 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 Farmaceutica will offset losses from the drop in Farmaceutica's long position.
The idea behind Citigroup and Farmaceutica R 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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