Correlation Between Citigroup and Orient Rental

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

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

Diversification Opportunities for Citigroup and Orient Rental

0.83

Correlation Coefficient

Citigroup  Orient Rental

Very poor diversification

The 3 months correlation between Citigroup and Orient is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Orient Rental Modaraba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Rental Modaraba 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 Orient Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Rental Modaraba has no effect on the direction of Citigroup i.e., Citigroup and Orient Rental go up and down completely randomly.

Pair Corralation between Citigroup and Orient Rental

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.31 times less return on investment than Orient Rental. But when comparing it to its historical volatility, Citigroup is 4.34 times less risky than Orient Rental. It trades about 0.25 of its potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  798.00  in Orient Rental Modaraba on September 15, 2024 and sell it today you would earn a total of  37.00  from holding Orient Rental Modaraba or generate 4.64% return on investment over 90 days.

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

Citigroup  vs.  Orient Rental Modaraba

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.

Orient Rental Modaraba

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Orient Rental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Orient Rental

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

The idea behind Citigroup and Orient Rental Modaraba 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.