Correlation Between Citigroup and Bima Sakti

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

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

Diversification Opportunities for Citigroup and Bima Sakti

-0.31

Correlation Coefficient

Citigroup  Bima Sakti

Very good diversification

The 3 months correlation between Citigroup and Bima is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bima Sakti Pertiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bima Sakti Pertiwi 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 Bima Sakti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bima Sakti Pertiwi has no effect on the direction of Citigroup i.e., Citigroup and Bima Sakti go up and down completely randomly.

Pair Corralation between Citigroup and Bima Sakti

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.31 times less return on investment than Bima Sakti. But when comparing it to its historical volatility, Citigroup is 1.27 times less risky than Bima Sakti. It trades about 0.03 of its potential returns per unit of risk. Bima Sakti Pertiwi is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,100  in Bima Sakti Pertiwi on December 29, 2024 and sell it today you would earn a total of  1,800  from holding Bima Sakti Pertiwi or generate 35.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  Bima Sakti Pertiwi

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Bima Sakti Pertiwi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bima Sakti Pertiwi are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bima Sakti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Bima Sakti

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

The idea behind Citigroup and Bima Sakti Pertiwi 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 Transaction History module to view history of all your transactions and understand their impact on performance.