Correlation Between Citigroup and Kore Potash

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

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

Diversification Opportunities for Citigroup and Kore Potash

-0.34

Correlation Coefficient

Citigroup  Kore Potash

Very good diversification

The 3 months correlation between Citigroup and Kore is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Kore Potash Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kore Potash Plc 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 Kore Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kore Potash Plc has no effect on the direction of Citigroup i.e., Citigroup and Kore Potash go up and down completely randomly.

Pair Corralation between Citigroup and Kore Potash

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Kore Potash. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.36 times less risky than Kore Potash. The stock trades about -0.2 of its potential returns per unit of risk. The Kore Potash Plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,800  in Kore Potash Plc on December 4, 2024 and sell it today you would earn a total of  700.00  from holding Kore Potash Plc or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Kore Potash Plc

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Kore Potash Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kore Potash Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kore Potash is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Kore Potash

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

The idea behind Citigroup and Kore Potash Plc 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.