Correlation Between Citigroup and Spruce Biosciences

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

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

Diversification Opportunities for Citigroup and Spruce Biosciences

-0.37

Correlation Coefficient

Citigroup  Spruce Biosciences

Very good diversification

The 3 months correlation between Citigroup and Spruce is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spruce Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spruce Biosciences 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 Spruce Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spruce Biosciences has no effect on the direction of Citigroup i.e., Citigroup and Spruce Biosciences go up and down completely randomly.

Pair Corralation between Citigroup and Spruce Biosciences

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.52 times more return on investment than Spruce Biosciences. However, Citigroup is 1.92 times less risky than Spruce Biosciences. It trades about 0.46 of its potential returns per unit of risk. Spruce Biosciences is currently generating about -0.02 per unit of risk. If you would invest  6,977  in Citigroup on October 24, 2024 and sell it today you would earn a total of  1,192  from holding Citigroup or generate 17.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Spruce Biosciences

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Spruce Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spruce Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Spruce Biosciences

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

The idea behind Citigroup and Spruce Biosciences 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.