Correlation Between Citigroup Capital and Bank of America
Can any of the company-specific risk be diversified away by investing in both Citigroup Capital and Bank of America 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 Capital and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup Capital XIII and Bank of America, you can compare the effects of market volatilities on Citigroup Capital and Bank of America 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 Capital with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup Capital and Bank of America.
Diversification Opportunities for Citigroup Capital and Bank of America
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Bank is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup Capital XIII and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Citigroup Capital 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 Capital XIII are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Citigroup Capital i.e., Citigroup Capital and Bank of America go up and down completely randomly.
Pair Corralation between Citigroup Capital and Bank of America
Given the investment horizon of 90 days Citigroup Capital is expected to generate 1.28 times less return on investment than Bank of America. But when comparing it to its historical volatility, Citigroup Capital XIII is 1.43 times less risky than Bank of America. It trades about 0.11 of its potential returns per unit of risk. Bank of America is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,735 in Bank of America on August 27, 2024 and sell it today you would earn a total of 687.00 from holding Bank of America or generate 39.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup Capital XIII vs. Bank of America
Performance |
| Timeline |
| Citigroup Capital XIII |
| Bank of America |
Citigroup Capital and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup Capital and Bank of America
The main advantage of trading using opposite Citigroup Capital and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup Capital position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.The idea behind Citigroup Capital XIII and Bank of America 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.| Bank of America vs. China Construction Bank | Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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