Correlation Between Citigroup and ICICI Bank

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

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

Diversification Opportunities for Citigroup and ICICI Bank

0.19

Correlation Coefficient

Citigroup  ICICI Bank

Average diversification

The 3 months correlation between Citigroup and ICICI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank 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 ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of Citigroup i.e., Citigroup and ICICI Bank go up and down completely randomly.

Pair Corralation between Citigroup and ICICI Bank

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.07 times more return on investment than ICICI Bank. However, Citigroup is 1.07 times more volatile than ICICI Bank Limited. It trades about 0.25 of its potential returns per unit of risk. ICICI Bank Limited is currently generating about -0.07 per unit of risk. If you would invest  6,360  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,809  from holding Citigroup or generate 28.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  ICICI Bank Limited

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and ICICI Bank

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

The idea behind Citigroup and ICICI Bank 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.