Correlation Between Citigroup and Baxter International

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

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

Diversification Opportunities for Citigroup and Baxter International

0.73

Correlation Coefficient

Citigroup  Baxter International

Poor diversification

The 3 months correlation between Citigroup and Baxter is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Citigroup i.e., Citigroup and Baxter International go up and down completely randomly.

Pair Corralation between Citigroup and Baxter International

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.98 times more return on investment than Baxter International. However, Citigroup is 1.02 times less risky than Baxter International. It trades about -0.1 of its potential returns per unit of risk. Baxter International is currently generating about -0.17 per unit of risk. If you would invest  6,013  in Citigroup on January 20, 2024 and sell it today you would lose (181.00) from holding Citigroup or give up 3.01% of portfolio value over 90 days.

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

Citigroup  vs.  Baxter International

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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 May 2024.

Baxter International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 3 (%) 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.

Pair Trading with Citigroup and Baxter International

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

The idea behind Citigroup and Baxter International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.