Correlation Between Citigroup and BT Group
Can any of the company-specific risk be diversified away by investing in both Citigroup and BT Group 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 BT Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and BT Group Plc, you can compare the effects of market volatilities on Citigroup and BT Group 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 BT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BT Group.
Diversification Opportunities for Citigroup and BT Group
Modest diversification
The 3 months correlation between Citigroup and BT-A is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BT Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Group Plc 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 BT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Group Plc has no effect on the direction of Citigroup i.e., Citigroup and BT Group go up and down completely randomly.
Pair Corralation between Citigroup and BT Group
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.19 times less return on investment than BT Group. In addition to that, Citigroup is 1.08 times more volatile than BT Group Plc. It trades about 0.26 of its total potential returns per unit of risk. BT Group Plc is currently generating about 0.33 per unit of volatility. If you would invest 13,825 in BT Group Plc on September 1, 2024 and sell it today you would earn a total of 2,105 from holding BT Group Plc or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Citigroup vs. BT Group Plc
Performance |
| Timeline |
| Citigroup |
| BT Group Plc |
Citigroup and BT Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and BT Group
The main advantage of trading using opposite Citigroup and BT Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BT Group 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 BT Group will offset losses from the drop in BT Group's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| BT Group vs. Bloomsbury Publishing Plc | BT Group vs. Bytes Technology | BT Group vs. Spotify Technology SA | BT Group vs. JB Hunt Transport |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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