Correlation Between Citigroup and Addex Therapeutics

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

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

Diversification Opportunities for Citigroup and Addex Therapeutics

0.22

Correlation Coefficient

Citigroup  Addex Therapeutics

Modest diversification

The 3 months correlation between Citigroup and Addex is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Addex Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addex 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 Addex Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addex Therapeutics has no effect on the direction of Citigroup i.e., Citigroup and Addex Therapeutics go up and down completely randomly.

Pair Corralation between Citigroup and Addex Therapeutics

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.58 times less return on investment than Addex Therapeutics. But when comparing it to its historical volatility, Citigroup is 7.59 times less risky than Addex Therapeutics. It trades about 0.21 of its potential returns per unit of risk. Addex Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,035  in Addex Therapeutics on February 12, 2024 and sell it today you would lose (101.00) from holding Addex Therapeutics or give up 9.76% of portfolio value over 90 days.

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

Citigroup  vs.  Addex Therapeutics

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Addex Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Addex Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Addex Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Addex Therapeutics

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

The idea behind Citigroup and Addex Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.