Correlation Between Citigroup and Aclaris Therapeutics

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

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

Diversification Opportunities for Citigroup and Aclaris Therapeutics

0.76

Correlation Coefficient

Citigroup  Aclaris Therapeutics

Poor diversification

The 3 months correlation between Citigroup and Aclaris is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aclaris Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclaris Therapeutics 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 Aclaris Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclaris Therapeutics has no effect on the direction of Citigroup i.e., Citigroup and Aclaris Therapeutics go up and down completely randomly.

Pair Corralation between Citigroup and Aclaris Therapeutics

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.34 times less return on investment than Aclaris Therapeutics. But when comparing it to its historical volatility, Citigroup is 5.3 times less risky than Aclaris Therapeutics. It trades about 0.14 of its potential returns per unit of risk. Aclaris Therapeutics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Aclaris Therapeutics on September 4, 2024 and sell it today you would earn a total of  279.00  from holding Aclaris Therapeutics or generate 238.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Aclaris Therapeutics

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Aclaris Therapeutics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aclaris Therapeutics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Aclaris Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Aclaris Therapeutics

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

The idea behind Citigroup and Aclaris Therapeutics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.