Correlation Between Citigroup and KemPharm

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

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

Diversification Opportunities for Citigroup and KemPharm

0.67

Correlation Coefficient

Citigroup  KemPharm

Poor diversification

The 3 months correlation between Citigroup and KemPharm is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KemPharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KemPharm 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 KemPharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KemPharm has no effect on the direction of Citigroup i.e., Citigroup and KemPharm go up and down completely randomly.

Pair Corralation between Citigroup and KemPharm

If you would invest  581.00  in KemPharm on January 19, 2024 and sell it today you would earn a total of  0.00  from holding KemPharm or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Citigroup  vs.  KemPharm

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

KemPharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KemPharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, KemPharm is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and KemPharm

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

The idea behind Citigroup and KemPharm 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.