Correlation Between Citigroup and PEPKOR

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

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

Diversification Opportunities for Citigroup and PEPKOR

0.67

Correlation Coefficient

Citigroup  PEPKOR

Poor diversification

The 3 months correlation between Citigroup and PEPKOR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PEPKOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPKOR LTD 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 PEPKOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPKOR LTD has no effect on the direction of Citigroup i.e., Citigroup and PEPKOR go up and down completely randomly.

Pair Corralation between Citigroup and PEPKOR

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.66 times less return on investment than PEPKOR. But when comparing it to its historical volatility, Citigroup is 4.24 times less risky than PEPKOR. It trades about 0.07 of its potential returns per unit of risk. PEPKOR LTD is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25.00  in PEPKOR LTD on September 23, 2024 and sell it today you would earn a total of  134.00  from holding PEPKOR LTD or generate 536.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.03%
Values	Daily Returns

Citigroup  vs.  PEPKOR LTD

Citigroup

Risk-Adjusted Performance

7 of 100

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 uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PEPKOR LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PEPKOR LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PEPKOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and PEPKOR

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

The idea behind Citigroup and PEPKOR LTD 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.