Correlation Between Citigroup and Bkm Industries

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

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

Diversification Opportunities for Citigroup and Bkm Industries

0.77

Correlation Coefficient

Citigroup  Bkm Industries

Poor diversification

The 3 months correlation between Citigroup and Bkm is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bkm Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bkm Industries 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 Bkm Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bkm Industries has no effect on the direction of Citigroup i.e., Citigroup and Bkm Industries go up and down completely randomly.

Pair Corralation between Citigroup and Bkm Industries

Taking into account the 90-day investment horizon Citigroup is expected to generate 63.75 times less return on investment than Bkm Industries. But when comparing it to its historical volatility, Citigroup is 44.19 times less risky than Bkm Industries. It trades about 0.05 of its potential returns per unit of risk. Bkm Industries Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Bkm Industries Limited on September 24, 2024 and sell it today you would earn a total of  4,300  from holding Bkm Industries Limited or generate 2150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.19%
Values	Daily Returns

Citigroup  vs.  Bkm Industries Limited

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Bkm Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bkm Industries Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Bkm Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Bkm Industries

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

The idea behind Citigroup and Bkm Industries 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.