Correlation Between Citigroup and Zota Health

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

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

Diversification Opportunities for Citigroup and Zota Health

-0.37

Correlation Coefficient

Citigroup  Zota Health

Very good diversification

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

Pair Corralation between Citigroup and Zota Health

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.79 times less return on investment than Zota Health. But when comparing it to its historical volatility, Citigroup is 2.9 times less risky than Zota Health. It trades about 0.25 of its potential returns per unit of risk. Zota Health Care is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  56,490  in Zota Health Care on September 15, 2024 and sell it today you would earn a total of  12,100  from holding Zota Health Care or generate 21.42% return on investment over 90 days.

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

Citigroup  vs.  Zota Health Care

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Zota Health Care

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zota Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Zota Health

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

The idea behind Citigroup and Zota Health Care 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.