Correlation Between Baxter International and Citigroup

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

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

Diversification Opportunities for Baxter International and Citigroup

0.75

Correlation Coefficient

Baxter International  Citigroup

Poor diversification

The 3 months correlation between Baxter and Citigroup is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Baxter International 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 Baxter International 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 Baxter International i.e., Baxter International and Citigroup go up and down completely randomly.

Pair Corralation between Baxter International and Citigroup

Considering the 90-day investment horizon Baxter International is expected to under-perform the Citigroup. In addition to that, Baxter International is 1.1 times more volatile than Citigroup. It trades about -0.12 of its total potential returns per unit of risk. Citigroup is currently generating about 0.0 per unit of volatility. If you would invest  5,863  in Citigroup on January 17, 2024 and sell it today you would lose (7.00) from holding Citigroup or give up 0.12% of portfolio value over 90 days.

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

Baxter International  vs.  Citigroup

Baxter International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Baxter International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Baxter International and Citigroup

The main advantage of trading using opposite Baxter International and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International 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 Baxter International 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 Global Correlations module to find global opportunities by holding instruments from different markets.