Correlation Between Citigroup and Provident Agro

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

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

Diversification Opportunities for Citigroup and Provident Agro

-0.27

Correlation Coefficient

Citigroup  Provident Agro

Very good diversification

The 3 months correlation between Citigroup and Provident is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro Tbk 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 Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Citigroup i.e., Citigroup and Provident Agro go up and down completely randomly.

Pair Corralation between Citigroup and Provident Agro

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.24 times less return on investment than Provident Agro. But when comparing it to its historical volatility, Citigroup is 1.52 times less risky than Provident Agro. It trades about 0.01 of its potential returns per unit of risk. Provident Agro Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  43,200  in Provident Agro Tbk on December 31, 2024 and sell it today you would lose (200.00) from holding Provident Agro Tbk or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Citigroup  vs.  Provident Agro Tbk

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Provident Agro Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Agro Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Provident Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Provident Agro

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

The idea behind Citigroup and Provident Agro Tbk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.