Correlation Between Citigroup and Inrom Construction

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

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

Diversification Opportunities for Citigroup and Inrom Construction

0.84

Correlation Coefficient

Citigroup  Inrom Construction

Very poor diversification

The 3 months correlation between Citigroup and Inrom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Inrom Construction Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrom Construction 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 Inrom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrom Construction has no effect on the direction of Citigroup i.e., Citigroup and Inrom Construction go up and down completely randomly.

Pair Corralation between Citigroup and Inrom Construction

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.61 times less return on investment than Inrom Construction. But when comparing it to its historical volatility, Citigroup is 1.23 times less risky than Inrom Construction. It trades about 0.11 of its potential returns per unit of risk. Inrom Construction Industries is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  126,205  in Inrom Construction Industries on October 12, 2024 and sell it today you would earn a total of  49,295  from holding Inrom Construction Industries or generate 39.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	77.05%
Values	Daily Returns

Citigroup  vs.  Inrom Construction Industries

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Inrom Construction

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inrom Construction Industries are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inrom Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Inrom Construction

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

The idea behind Citigroup and Inrom Construction Industries 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.