Correlation Between Citigroup and KeppelLimited

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

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

Diversification Opportunities for Citigroup and KeppelLimited

0.44

Correlation Coefficient

Citigroup  KeppelLimited

Very weak diversification

The 3 months correlation between Citigroup and KeppelLimited is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel 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 KeppelLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of Citigroup i.e., Citigroup and KeppelLimited go up and down completely randomly.

Pair Corralation between Citigroup and KeppelLimited

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than KeppelLimited. However, Citigroup is 1.66 times less risky than KeppelLimited. It trades about 0.41 of its potential returns per unit of risk. Keppel Limited is currently generating about 0.12 per unit of risk. If you would invest  6,977  in Citigroup on October 24, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Citigroup  vs.  Keppel Limited

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Keppel Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, KeppelLimited may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and KeppelLimited

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

The idea behind Citigroup and Keppel 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.