Correlation Between Citigroup and Elite Pharma

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

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

Diversification Opportunities for Citigroup and Elite Pharma

0.7

Correlation Coefficient

Citigroup  Elite Pharma

Poor diversification

The 3 months correlation between Citigroup and Elite is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Elite Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Pharma 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 Elite Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Pharma has no effect on the direction of Citigroup i.e., Citigroup and Elite Pharma go up and down completely randomly.

Pair Corralation between Citigroup and Elite Pharma

If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Citigroup  vs.  Elite Pharma

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Elite Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Elite Pharma is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Elite Pharma

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

The idea behind Citigroup and Elite Pharma 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.