Correlation Between Citigroup and KEI Industries

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

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

Diversification Opportunities for Citigroup and KEI Industries

0.15

Correlation Coefficient

Citigroup  KEI Industries

Average diversification

The 3 months correlation between Citigroup and KEI is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Citigroup i.e., Citigroup and KEI Industries go up and down completely randomly.

Pair Corralation between Citigroup and KEI Industries

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.81 times more return on investment than KEI Industries. However, Citigroup is 1.23 times less risky than KEI Industries. It trades about 0.1 of its potential returns per unit of risk. KEI Industries Limited is currently generating about 0.0 per unit of risk. If you would invest  6,203  in Citigroup on September 22, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

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

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KEI Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and KEI Industries

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

The idea behind Citigroup and KEI 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.