Correlation Between Citigroup and Ghani Gases

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

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

Diversification Opportunities for Citigroup and Ghani Gases

0.82

Correlation Coefficient

Citigroup  Ghani Gases

Very poor diversification

The 3 months correlation between Citigroup and Ghani is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ghani Gases in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghani Gases 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 Ghani Gases. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghani Gases has no effect on the direction of Citigroup i.e., Citigroup and Ghani Gases go up and down completely randomly.

Pair Corralation between Citigroup and Ghani Gases

Taking into account the 90-day investment horizon Citigroup is expected to generate 110.25 times less return on investment than Ghani Gases. But when comparing it to its historical volatility, Citigroup is 4.09 times less risky than Ghani Gases. It trades about 0.01 of its potential returns per unit of risk. Ghani Gases is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,115  in Ghani Gases on September 29, 2024 and sell it today you would earn a total of  467.00  from holding Ghani Gases or generate 41.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Ghani Gases

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.

Ghani Gases

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Gases are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghani Gases reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Ghani Gases

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

The idea behind Citigroup and Ghani Gases 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.