Correlation Between Citigroup and Infosys

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

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

Diversification Opportunities for Citigroup and Infosys

0.71

Correlation Coefficient

Citigroup  Infosys

Poor diversification

The 3 months correlation between Citigroup and Infosys is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of Citigroup i.e., Citigroup and Infosys go up and down completely randomly.

Pair Corralation between Citigroup and Infosys

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.34 times less return on investment than Infosys. In addition to that, Citigroup is 1.01 times more volatile than Infosys Limited. It trades about 0.1 of its total potential returns per unit of risk. Infosys Limited is currently generating about 0.14 per unit of volatility. If you would invest  6,210  in Infosys Limited on September 23, 2024 and sell it today you would earn a total of  958.00  from holding Infosys Limited or generate 15.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Citigroup  vs.  Infosys Limited

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.

Infosys Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Infosys sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Infosys

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

The idea behind Citigroup and Infosys 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..