Correlation Between International Biotechnology and Citigroup

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

By analyzing existing cross correlation between International Biotechnology Trust and Citigroup, you can compare the effects of market volatilities on International Biotechnology and Citigroup 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 International Biotechnology with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Citigroup.

Diversification Opportunities for International Biotechnology and Citigroup

0.71

Correlation Coefficient

International Biotechnology  Citigroup

Poor diversification

The 3 months correlation between International and Citigroup is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and International Biotechnology 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 International Biotechnology Trust are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of International Biotechnology i.e., International Biotechnology and Citigroup go up and down completely randomly.

Pair Corralation between International Biotechnology and Citigroup

Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.92 times more return on investment than Citigroup. However, International Biotechnology Trust is 1.09 times less risky than Citigroup. It trades about 0.04 of its potential returns per unit of risk. Citigroup is currently generating about 0.01 per unit of risk. If you would invest  67,875  in International Biotechnology Trust on September 26, 2024 and sell it today you would earn a total of  525.00  from holding International Biotechnology Trust or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

International Biotechnology Tr  vs.  Citigroup

International Biotechnology

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Citigroup unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Biotechnology and Citigroup

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

The idea behind International Biotechnology Trust and Citigroup 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.