Correlation Between Citigroup and Incar Financial

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

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

Diversification Opportunities for Citigroup and Incar Financial

-0.25

Correlation Coefficient

Citigroup  Incar Financial

Very good diversification

The 3 months correlation between Citigroup and Incar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Incar Financial Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incar Financial Service 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 Incar Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incar Financial Service has no effect on the direction of Citigroup i.e., Citigroup and Incar Financial go up and down completely randomly.

Pair Corralation between Citigroup and Incar Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.57 times less return on investment than Incar Financial. But when comparing it to its historical volatility, Citigroup is 1.35 times less risky than Incar Financial. It trades about 0.01 of its potential returns per unit of risk. Incar Financial Service is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  561,000  in Incar Financial Service on December 30, 2024 and sell it today you would earn a total of  146,000  from holding Incar Financial Service or generate 26.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Citigroup  vs.  Incar Financial Service

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Incar Financial Service

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Incar Financial

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

The idea behind Citigroup and Incar Financial Service 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.