Correlation Between Citigroup and Oriental Carbon

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

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

Diversification Opportunities for Citigroup and Oriental Carbon

-0.46

Correlation Coefficient

Citigroup  Oriental Carbon

Very good diversification

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

Pair Corralation between Citigroup and Oriental Carbon

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Oriental Carbon. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.72 times less risky than Oriental Carbon. The stock trades about -0.04 of its potential returns per unit of risk. The Oriental Carbon Chemicals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  22,915  in Oriental Carbon Chemicals on September 19, 2024 and sell it today you would earn a total of  1,696  from holding Oriental Carbon Chemicals or generate 7.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Oriental Carbon Chemicals

Citigroup

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oriental Carbon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Oriental Carbon

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

The idea behind Citigroup and Oriental Carbon Chemicals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.