Correlation Between Citigroup and Bank of America
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 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 and Bank of America, you can compare the effects of market volatilities on Citigroup 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 with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Bank of America.
Diversification Opportunities for Citigroup and Bank of America
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Bank is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 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 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 i.e., Citigroup and Bank of America go up and down completely randomly.
Pair Corralation between Citigroup and Bank of America
Given the investment horizon of 90 days Citigroup is expected to generate 1.2 times more return on investment than Bank of America. However, Citigroup is 1.2 times more volatile than Bank of America. It trades about 0.16 of its potential returns per unit of risk. Bank of America is currently generating about 0.12 per unit of risk. If you would invest 123,422 in Citigroup on November 2, 2024 and sell it today you would earn a total of 46,187 from holding Citigroup or generate 37.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Citigroup vs. Bank of America
Performance |
| Timeline |
| Citigroup |
| Bank of America |
Citigroup and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Bank of America
The main advantage of trading using opposite Citigroup and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.| Citigroup vs. Grupo Carso SAB | Citigroup vs. Grupo Sports World | Citigroup vs. Micron Technology | Citigroup vs. Desarrolladora Homex SAB |
| Bank of America vs. The Home Depot | Bank of America vs. Applied Materials | Bank of America vs. Deutsche Bank Aktiengesellschaft | Bank of America vs. New Oriental Education |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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