Correlation Between Citigroup and InVivo Therapeutics

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

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

Diversification Opportunities for Citigroup and InVivo Therapeutics

-0.18

Correlation Coefficient

Citigroup  InVivo Therapeutics

Good diversification

The 3 months correlation between Citigroup and InVivo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and InVivo Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InVivo 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 InVivo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InVivo Therapeutics has no effect on the direction of Citigroup i.e., Citigroup and InVivo Therapeutics go up and down completely randomly.

Pair Corralation between Citigroup and InVivo Therapeutics

If you would invest  5,788  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Citigroup  vs.  InVivo Therapeutics Holdings

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.

InVivo Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InVivo Therapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, InVivo Therapeutics is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and InVivo Therapeutics

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

The idea behind Citigroup and InVivo Therapeutics Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.