Correlation Between Citigroup and Alfalah Consumer

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

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

Diversification Opportunities for Citigroup and Alfalah Consumer

0.51

Correlation Coefficient

Citigroup  Alfalah Consumer

Very weak diversification

The 3 months correlation between Citigroup and Alfalah is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alfalah Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfalah Consumer 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 Alfalah Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfalah Consumer has no effect on the direction of Citigroup i.e., Citigroup and Alfalah Consumer go up and down completely randomly.

Pair Corralation between Citigroup and Alfalah Consumer

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.43 times more return on investment than Alfalah Consumer. However, Citigroup is 2.34 times less risky than Alfalah Consumer. It trades about 0.0 of its potential returns per unit of risk. Alfalah Consumer is currently generating about -0.1 per unit of risk. If you would invest  7,149  in Citigroup on October 15, 2024 and sell it today you would lose (9.00) from holding Citigroup or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Citigroup  vs.  Alfalah Consumer

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Alfalah Consumer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alfalah Consumer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Alfalah Consumer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Alfalah Consumer

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

The idea behind Citigroup and Alfalah Consumer 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.