Correlation Between Citigroup and PT Indosat

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

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

Diversification Opportunities for Citigroup and PT Indosat

-0.54

Correlation Coefficient

Citigroup  PT Indosat

Excellent diversification

The 3 months correlation between Citigroup and IDO1 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat 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 PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of Citigroup i.e., Citigroup and PT Indosat go up and down completely randomly.

Pair Corralation between Citigroup and PT Indosat

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.25 times less return on investment than PT Indosat. But when comparing it to its historical volatility, Citigroup is 4.95 times less risky than PT Indosat. It trades about 0.12 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  15.00  in PT Indosat Tbk on September 19, 2024 and sell it today you would lose (1.00) from holding PT Indosat Tbk or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  PT Indosat Tbk

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

PT Indosat Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indosat Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indosat reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and PT Indosat

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

The idea behind Citigroup and PT Indosat 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.