Correlation Between Citigroup and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both Citigroup and ABSA Bank 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 ABSA Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and ABSA Bank Limited, you can compare the effects of market volatilities on Citigroup and ABSA Bank 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 ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and ABSA Bank.
Diversification Opportunities for Citigroup and ABSA Bank
Very poor diversification
The 3 months correlation between Citigroup and ABSA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited 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 ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of Citigroup i.e., Citigroup and ABSA Bank go up and down completely randomly.
Pair Corralation between Citigroup and ABSA Bank
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.51 times more return on investment than ABSA Bank. However, Citigroup is 1.51 times more volatile than ABSA Bank Limited. It trades about 0.12 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about 0.04 per unit of risk. If you would invest 3,936 in Citigroup on August 27, 2024 and sell it today you would earn a total of 3,048 from holding Citigroup or generate 77.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.35% |
| Values | Daily Returns |
Citigroup vs. ABSA Bank Limited
Performance |
| Timeline |
| Citigroup |
| ABSA Bank Limited |
Citigroup and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and ABSA Bank
The main advantage of trading using opposite Citigroup and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
| ABSA Bank vs. Capitec Bank Holdings | ABSA Bank vs. Capitec Bank Holdings | ABSA Bank vs. Nedbank Group | ABSA Bank vs. RMB Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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