Correlation Between Citigroup and InfoBank
Can any of the company-specific risk be diversified away by investing in both Citigroup and InfoBank 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 InfoBank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and InfoBank, you can compare the effects of market volatilities on Citigroup and InfoBank 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 InfoBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and InfoBank.
Diversification Opportunities for Citigroup and InfoBank
Good diversification
The 3 months correlation between Citigroup and InfoBank is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and InfoBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfoBank 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 InfoBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfoBank has no effect on the direction of Citigroup i.e., Citigroup and InfoBank go up and down completely randomly.
Pair Corralation between Citigroup and InfoBank
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.51 times less return on investment than InfoBank. But when comparing it to its historical volatility, Citigroup is 2.36 times less risky than InfoBank. It trades about 0.21 of its potential returns per unit of risk. InfoBank is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 595,000 in InfoBank on August 28, 2024 and sell it today you would earn a total of 145,000 from holding InfoBank or generate 24.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. InfoBank
Performance |
| Timeline |
| Citigroup |
| InfoBank |
Citigroup and InfoBank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and InfoBank
The main advantage of trading using opposite Citigroup and InfoBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, InfoBank 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 InfoBank will offset losses from the drop in InfoBank's long position.The idea behind Citigroup and InfoBank 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.| InfoBank vs. Korea Real Estate | InfoBank vs. Korea Ratings Co | InfoBank vs. IQuest Co | InfoBank vs. Wonbang Tech Co |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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