Correlation Between Citigroup and Fresenius Medical

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

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

Diversification Opportunities for Citigroup and Fresenius Medical

0.19

Correlation Coefficient

Citigroup  Fresenius Medical

Average diversification

The 3 months correlation between Citigroup and Fresenius is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Citigroup i.e., Citigroup and Fresenius Medical go up and down completely randomly.

Pair Corralation between Citigroup and Fresenius Medical

Assuming the 90 days trading horizon Citigroup is expected to under-perform the Fresenius Medical. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.44 times less risky than Fresenius Medical. The stock trades about -0.02 of its potential returns per unit of risk. The Fresenius Medical Care is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,945  in Fresenius Medical Care on December 27, 2024 and sell it today you would earn a total of  2,766  from holding Fresenius Medical Care or generate 25.27% return on investment over 90 days.

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

Citigroup  vs.  Fresenius Medical Care

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Citigroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fresenius Medical Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fresenius Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Fresenius Medical

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

The idea behind Citigroup and Fresenius Medical 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.