Correlation Between Citigroup and MST Investment

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

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

Diversification Opportunities for Citigroup and MST Investment

0.74

Correlation Coefficient

Citigroup  MST Investment

Poor diversification

The 3 months correlation between Citigroup and MST is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MST Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MST Investment JSC 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 MST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MST Investment JSC has no effect on the direction of Citigroup i.e., Citigroup and MST Investment go up and down completely randomly.

Pair Corralation between Citigroup and MST Investment

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times less return on investment than MST Investment. But when comparing it to its historical volatility, Citigroup is 1.34 times less risky than MST Investment. It trades about 0.18 of its potential returns per unit of risk. MST Investment JSC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  510,000  in MST Investment JSC on September 16, 2024 and sell it today you would earn a total of  160,000  from holding MST Investment JSC or generate 31.37% return on investment over 90 days.

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

Citigroup  vs.  MST Investment JSC

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

MST Investment JSC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MST Investment JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MST Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and MST Investment

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

The idea behind Citigroup and MST Investment JSC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.