Correlation Between Fresenius Medical and Citigroup

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

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

Diversification Opportunities for Fresenius Medical and Citigroup

0.82

Correlation Coefficient

Fresenius Medical  Citigroup

Very poor diversification

The 3 months correlation between Fresenius and Citigroup is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Fresenius Medical 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 Fresenius Medical Care 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 Fresenius Medical i.e., Fresenius Medical and Citigroup go up and down completely randomly.

Pair Corralation between Fresenius Medical and Citigroup

Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 2.55 times more return on investment than Citigroup. However, Fresenius Medical is 2.55 times more volatile than Citigroup. It trades about 0.26 of its potential returns per unit of risk. Citigroup is currently generating about 0.32 per unit of risk. If you would invest  4,195  in Fresenius Medical Care on September 17, 2024 and sell it today you would earn a total of  325.00  from holding Fresenius Medical Care or generate 7.75% return on investment over 90 days.

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

Fresenius Medical Care  vs.  Citigroup

Fresenius Medical Care

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively uncertain basic indicators, Citigroup unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresenius Medical and Citigroup

The main advantage of trading using opposite Fresenius Medical and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical 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 Fresenius Medical Care 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.

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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.