Correlation Between Citigroup and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both Citigroup and Smith Nephew 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 Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Smith Nephew plc, you can compare the effects of market volatilities on Citigroup and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Smith Nephew.
Diversification Opportunities for Citigroup and Smith Nephew
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Smith is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Smith Nephew plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew plc has no effect on the direction of Citigroup i.e., Citigroup and Smith Nephew go up and down completely randomly.
Pair Corralation between Citigroup and Smith Nephew
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.14 times less return on investment than Smith Nephew. But when comparing it to its historical volatility, Citigroup is 1.93 times less risky than Smith Nephew. It trades about 0.09 of its potential returns per unit of risk. Smith Nephew plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,290 in Smith Nephew plc on December 3, 2024 and sell it today you would earn a total of 170.00 from holding Smith Nephew plc or generate 13.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 73.77% |
Values | Daily Returns |
Citigroup vs. Smith Nephew plc
Performance |
Timeline |
Citigroup |
Smith Nephew plc |
Citigroup and Smith Nephew Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Smith Nephew
The main advantage of trading using opposite Citigroup and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
Smith Nephew vs. Sonova Holding AG | Smith Nephew vs. Medtronic PLC | Smith Nephew vs. CONMED | Smith Nephew vs. Glaukos Corp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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