Correlation Between Citigroup and Inter Industries

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

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

Diversification Opportunities for Citigroup and Inter Industries

0.34

Correlation Coefficient

Citigroup  Inter Industries

Weak diversification

The 3 months correlation between Citigroup and Inter is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Inter Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter 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 Inter Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Industries has no effect on the direction of Citigroup i.e., Citigroup and Inter Industries go up and down completely randomly.

Pair Corralation between Citigroup and Inter Industries

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Inter Industries. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.34 times less risky than Inter Industries. The stock trades about -0.09 of its potential returns per unit of risk. The Inter Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24,930  in Inter Industries on September 25, 2024 and sell it today you would earn a total of  80.00  from holding Inter Industries or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Citigroup  vs.  Inter Industries

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Inter Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inter Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Inter Industries

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

The idea behind Citigroup and Inter Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.