Correlation Between Citigroup and Medipharm Labs

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

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

Diversification Opportunities for Citigroup and Medipharm Labs

-0.45

Correlation Coefficient

Citigroup  Medipharm Labs

Very good diversification

The 3 months correlation between Citigroup and Medipharm is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Medipharm Labs Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medipharm Labs Corp 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 Medipharm Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medipharm Labs Corp has no effect on the direction of Citigroup i.e., Citigroup and Medipharm Labs go up and down completely randomly.

Pair Corralation between Citigroup and Medipharm Labs

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.29 times more return on investment than Medipharm Labs. However, Citigroup is 3.39 times less risky than Medipharm Labs. It trades about -0.01 of its potential returns per unit of risk. Medipharm Labs Corp is currently generating about -0.16 per unit of risk. If you would invest  6,860  in Citigroup on September 20, 2024 and sell it today you would lose (18.00) from holding Citigroup or give up 0.26% of portfolio value over 90 days.

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

Citigroup  vs.  Medipharm Labs Corp

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Medipharm Labs Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medipharm Labs Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Medipharm Labs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Medipharm Labs

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

The idea behind Citigroup and Medipharm Labs Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.