Correlation Between Citigroup and BAXALTA

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

By analyzing existing cross correlation between Citigroup and BAXALTA INC 525, you can compare the effects of market volatilities on Citigroup and BAXALTA 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 BAXALTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BAXALTA.

Diversification Opportunities for Citigroup and BAXALTA

-0.5

Correlation Coefficient

Citigroup  BAXALTA

Very good diversification

The 3 months correlation between Citigroup and BAXALTA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BAXALTA INC 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAXALTA INC 525 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 BAXALTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAXALTA INC 525 has no effect on the direction of Citigroup i.e., Citigroup and BAXALTA go up and down completely randomly.

Pair Corralation between Citigroup and BAXALTA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.32 times less return on investment than BAXALTA. But when comparing it to its historical volatility, Citigroup is 1.08 times less risky than BAXALTA. It trades about 0.4 of its potential returns per unit of risk. BAXALTA INC 525 is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  9,221  in BAXALTA INC 525 on October 26, 2024 and sell it today you would earn a total of  376.00  from holding BAXALTA INC 525 or generate 4.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	22.22%
Values	Daily Returns

Citigroup  vs.  BAXALTA INC 525

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.

BAXALTA INC 525

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BAXALTA INC 525 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BAXALTA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and BAXALTA

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

The idea behind Citigroup and BAXALTA INC 525 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.