Correlation Between Citigroup and PFIZER

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

By analyzing existing cross correlation between Citigroup and PFIZER INC 44, you can compare the effects of market volatilities on Citigroup and PFIZER 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 PFIZER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and PFIZER.

Diversification Opportunities for Citigroup and PFIZER

-0.05

Correlation Coefficient

Citigroup  PFIZER

Good diversification

The 3 months correlation between Citigroup and PFIZER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PFIZER INC 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER INC 44 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC 44 has no effect on the direction of Citigroup i.e., Citigroup and PFIZER go up and down completely randomly.

Pair Corralation between Citigroup and PFIZER

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.15 times less return on investment than PFIZER. But when comparing it to its historical volatility, Citigroup is 2.43 times less risky than PFIZER. It trades about 0.08 of its potential returns per unit of risk. PFIZER INC 44 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,031  in PFIZER INC 44 on October 13, 2024 and sell it today you would earn a total of  3,888  from holding PFIZER INC 44 or generate 43.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.31%
Values	Daily Returns

Citigroup  vs.  PFIZER INC 44

Citigroup

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PFIZER INC 44

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PFIZER INC 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, PFIZER sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and PFIZER

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

The idea behind Citigroup and PFIZER INC 44 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.