Correlation Between Citigroup and BFT
Can any of the company-specific risk be diversified away by investing in both Citigroup and BFT 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 BFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and BFT, you can compare the effects of market volatilities on Citigroup and BFT 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 BFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BFT.
Diversification Opportunities for Citigroup and BFT
Poor diversification
The 3 months correlation between Citigroup and BFT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BFT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFT 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 BFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFT has no effect on the direction of Citigroup i.e., Citigroup and BFT go up and down completely randomly.
Pair Corralation between Citigroup and BFT
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.21 times more return on investment than BFT. However, Citigroup is 4.77 times less risky than BFT. It trades about 0.06 of its potential returns per unit of risk. BFT is currently generating about 0.0 per unit of risk. If you would invest 4,733 in Citigroup on August 27, 2024 and sell it today you would earn a total of 2,251 from holding Citigroup or generate 47.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 56.04% |
| Values | Daily Returns |
Citigroup vs. BFT
Performance |
| Timeline |
| Citigroup |
| BFT |
Citigroup and BFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and BFT
The main advantage of trading using opposite Citigroup and BFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BFT 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 BFT will offset losses from the drop in BFT's long position.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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