Correlation Between Citigroup and Scilex Holding

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

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

Diversification Opportunities for Citigroup and Scilex Holding

0.17

Correlation Coefficient

Citigroup  Scilex Holding

Average diversification

The 3 months correlation between Citigroup and Scilex is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Citigroup i.e., Citigroup and Scilex Holding go up and down completely randomly.

Pair Corralation between Citigroup and Scilex Holding

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.11 times less return on investment than Scilex Holding. But when comparing it to its historical volatility, Citigroup is 8.84 times less risky than Scilex Holding. It trades about 0.13 of its potential returns per unit of risk. Scilex Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Scilex Holding on August 31, 2024 and sell it today you would lose (7.00) from holding Scilex Holding or give up 19.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Citigroup  vs.  Scilex Holding

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.

Scilex Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Scilex Holding

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

The idea behind Citigroup and Scilex Holding 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.