Correlation Between Citigroup and Zimmer Biomet

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

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

Diversification Opportunities for Citigroup and Zimmer Biomet

0.07

Correlation Coefficient

Citigroup  Zimmer Biomet

Significant diversification

The 3 months correlation between Citigroup and Zimmer is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings 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 Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of Citigroup i.e., Citigroup and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Citigroup and Zimmer Biomet

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.26 times more return on investment than Zimmer Biomet. However, Citigroup is 1.26 times more volatile than Zimmer Biomet Holdings. It trades about 0.04 of its potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about 0.02 per unit of risk. If you would invest  6,929  in Citigroup on December 21, 2024 and sell it today you would earn a total of  253.00  from holding Citigroup or generate 3.65% return on investment over 90 days.

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

Citigroup  vs.  Zimmer Biomet Holdings

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Zimmer Biomet Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Zimmer Biomet is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Zimmer Biomet

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

The idea behind Citigroup and Zimmer Biomet Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.