Correlation Between Citigroup and Axita Cotton
Can any of the company-specific risk be diversified away by investing in both Citigroup and Axita Cotton 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 Axita Cotton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Axita Cotton Limited, you can compare the effects of market volatilities on Citigroup and Axita Cotton 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 Axita Cotton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Axita Cotton.
Diversification Opportunities for Citigroup and Axita Cotton
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Citigroup and Axita is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Axita Cotton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axita Cotton Limited 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 Axita Cotton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axita Cotton Limited has no effect on the direction of Citigroup i.e., Citigroup and Axita Cotton go up and down completely randomly.
Pair Corralation between Citigroup and Axita Cotton
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.87 times more return on investment than Axita Cotton. However, Citigroup is 1.15 times less risky than Axita Cotton. It trades about 0.02 of its potential returns per unit of risk. Axita Cotton Limited is currently generating about -0.22 per unit of risk. If you would invest 7,075 in Citigroup on September 26, 2024 and sell it today you would earn a total of 25.00 from holding Citigroup or generate 0.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Citigroup vs. Axita Cotton Limited
Performance |
Timeline |
Citigroup |
Axita Cotton Limited |
Citigroup and Axita Cotton Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Axita Cotton
The main advantage of trading using opposite Citigroup and Axita Cotton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Axita Cotton 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 Axita Cotton will offset losses from the drop in Axita Cotton's long position.The idea behind Citigroup and Axita Cotton Limited 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.Axita Cotton vs. Reliance Industries Limited | Axita Cotton vs. HDFC Bank Limited | Axita Cotton vs. Kingfa Science Technology | Axita Cotton vs. Rico Auto Industries |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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