Correlation Between Citigroup and Southern Steel

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

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

Diversification Opportunities for Citigroup and Southern Steel

0.67

Correlation Coefficient

Citigroup  Southern Steel

Poor diversification

The 3 months correlation between Citigroup and Southern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Southern Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Steel Bhd 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 Southern Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Steel Bhd has no effect on the direction of Citigroup i.e., Citigroup and Southern Steel go up and down completely randomly.

Pair Corralation between Citigroup and Southern Steel

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than Southern Steel. However, Citigroup is 1.65 times less risky than Southern Steel. It trades about 0.07 of its potential returns per unit of risk. Southern Steel Bhd is currently generating about -0.02 per unit of risk. If you would invest  6,022  in Citigroup on September 22, 2024 and sell it today you would earn a total of  897.00  from holding Citigroup or generate 14.9% return on investment over 90 days.

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

Citigroup  vs.  Southern Steel Bhd

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.

Southern Steel Bhd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Steel Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Southern Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Southern Steel

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

The idea behind Citigroup and Southern Steel Bhd 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.