Correlation Between Citigroup and Omeros

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

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

Diversification Opportunities for Citigroup and Omeros

0.8

Correlation Coefficient

Citigroup  Omeros

Very poor diversification

The 3 months correlation between Citigroup and Omeros is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Omeros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omeros 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 Omeros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omeros has no effect on the direction of Citigroup i.e., Citigroup and Omeros go up and down completely randomly.

Pair Corralation between Citigroup and Omeros

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.57 times less return on investment than Omeros. But when comparing it to its historical volatility, Citigroup is 5.45 times less risky than Omeros. It trades about 0.18 of its potential returns per unit of risk. Omeros is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Omeros on September 15, 2024 and sell it today you would earn a total of  372.00  from holding Omeros or generate 107.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.97%
Values	Daily Returns

Citigroup  vs.  Omeros

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.

Omeros

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omeros are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Omeros reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Omeros

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

The idea behind Citigroup and Omeros 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.