Correlation Between Citigroup and Batu Kawan

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

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

Diversification Opportunities for Citigroup and Batu Kawan

0.81

Correlation Coefficient

Citigroup  Batu Kawan

Very poor diversification

The 3 months correlation between Citigroup and Batu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Batu Kawan Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batu Kawan Bhd 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 Batu Kawan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batu Kawan Bhd has no effect on the direction of Citigroup i.e., Citigroup and Batu Kawan go up and down completely randomly.

Pair Corralation between Citigroup and Batu Kawan

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.3 times more return on investment than Batu Kawan. However, Citigroup is 2.3 times more volatile than Batu Kawan Bhd. It trades about 0.07 of its potential returns per unit of risk. Batu Kawan Bhd is currently generating about -0.01 per unit of risk. If you would invest  4,381  in Citigroup on September 28, 2024 and sell it today you would earn a total of  2,694  from holding Citigroup or generate 61.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.36%
Values	Daily Returns

Citigroup  vs.  Batu Kawan Bhd

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Batu Kawan Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Batu Kawan Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Batu Kawan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Batu Kawan

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

The idea behind Citigroup and Batu Kawan Bhd 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.