Correlation Between Citigroup and Piramal Enterprises

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

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

Diversification Opportunities for Citigroup and Piramal Enterprises

-0.09

Correlation Coefficient

Citigroup  Piramal Enterprises

Good diversification

The 3 months correlation between Citigroup and Piramal is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Piramal Enterprises Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piramal Enterprises 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 Piramal Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piramal Enterprises has no effect on the direction of Citigroup i.e., Citigroup and Piramal Enterprises go up and down completely randomly.

Pair Corralation between Citigroup and Piramal Enterprises

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.75 times more return on investment than Piramal Enterprises. However, Citigroup is 1.33 times less risky than Piramal Enterprises. It trades about 0.01 of its potential returns per unit of risk. Piramal Enterprises Limited is currently generating about -0.05 per unit of risk. If you would invest  6,991  in Citigroup on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Piramal Enterprises Limited

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.

Piramal Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Piramal Enterprises Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Citigroup and Piramal Enterprises

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

The idea behind Citigroup and Piramal Enterprises Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.