Correlation Between Citigroup and Indo Rama

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

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

Diversification Opportunities for Citigroup and Indo Rama

-0.46

Correlation Coefficient

Citigroup  Indo Rama

Very good diversification

The 3 months correlation between Citigroup and Indo is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Indo Rama Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Rama Synthetics 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 Indo Rama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Rama Synthetics has no effect on the direction of Citigroup i.e., Citigroup and Indo Rama go up and down completely randomly.

Pair Corralation between Citigroup and Indo Rama

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than Indo Rama. However, Citigroup is 1.66 times less risky than Indo Rama. It trades about -0.02 of its potential returns per unit of risk. Indo Rama Synthetics is currently generating about -0.12 per unit of risk. If you would invest  7,139  in Citigroup on October 1, 2024 and sell it today you would lose (39.00) from holding Citigroup or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Indo Rama Synthetics

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Indo Rama Synthetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Rama Synthetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Citigroup and Indo Rama

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

The idea behind Citigroup and Indo Rama Synthetics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.