Correlation Between Citigroup and XL Axiata

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

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

Diversification Opportunities for Citigroup and XL Axiata

-0.32

Correlation Coefficient

Citigroup  XL Axiata

Very good diversification

The 3 months correlation between Citigroup and PTXKY is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and XL Axiata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XL Axiata 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 XL Axiata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XL Axiata Tbk has no effect on the direction of Citigroup i.e., Citigroup and XL Axiata go up and down completely randomly.

Pair Corralation between Citigroup and XL Axiata

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.11 times less return on investment than XL Axiata. But when comparing it to its historical volatility, Citigroup is 4.22 times less risky than XL Axiata. It trades about 0.02 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  256.00  in XL Axiata Tbk on September 25, 2024 and sell it today you would earn a total of  19.00  from holding XL Axiata Tbk or generate 7.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  XL Axiata Tbk

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

XL Axiata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, XL Axiata is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and XL Axiata

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

The idea behind Citigroup and XL Axiata 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.