Correlation Between Citigroup and Pakistan Aluminium

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

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

Diversification Opportunities for Citigroup and Pakistan Aluminium

-0.15

Correlation Coefficient

Citigroup  Pakistan Aluminium

Good diversification

The 3 months correlation between Citigroup and Pakistan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pakistan Aluminium Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Aluminium 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 Pakistan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Aluminium has no effect on the direction of Citigroup i.e., Citigroup and Pakistan Aluminium go up and down completely randomly.

Pair Corralation between Citigroup and Pakistan Aluminium

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.08 times less return on investment than Pakistan Aluminium. But when comparing it to its historical volatility, Citigroup is 2.08 times less risky than Pakistan Aluminium. It trades about 0.09 of its potential returns per unit of risk. Pakistan Aluminium Beverage is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,801  in Pakistan Aluminium Beverage on December 3, 2024 and sell it today you would earn a total of  2,542  from holding Pakistan Aluminium Beverage or generate 28.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  Pakistan Aluminium Beverage

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) 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 April 2025.

Pakistan Aluminium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Aluminium Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Aluminium sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Pakistan Aluminium

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

The idea behind Citigroup and Pakistan Aluminium Beverage 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.