Correlation Between Citigroup and Capital One
Can any of the company-specific risk be diversified away by investing in both Citigroup and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Capital One Financial, you can compare the effects of market volatilities on Citigroup and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Capital One.
Diversification Opportunities for Citigroup and Capital One
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Citigroup and Capital is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Citigroup i.e., Citigroup and Capital One go up and down completely randomly.
Pair Corralation between Citigroup and Capital One
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times more return on investment than Capital One. However, Citigroup is 1.36 times more volatile than Capital One Financial. It trades about 0.08 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.05 per unit of risk. If you would invest 4,525 in Citigroup on August 31, 2024 and sell it today you would earn a total of 2,562 from holding Citigroup or generate 56.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Capital One Financial
Performance |
| Timeline |
| Citigroup |
| Capital One Financial |
Citigroup and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Capital One
The main advantage of trading using opposite Citigroup and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Capital One vs. Nasdaq Inc | Capital One vs. Weyco Group | Capital One vs. Cedar Realty Trust | Capital One vs. Getty Realty |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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