Correlation Between Citigroup and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Citigroup and First Bancorp 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 First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and First Bancorp, you can compare the effects of market volatilities on Citigroup and First Bancorp 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and First Bancorp.
Diversification Opportunities for Citigroup and First Bancorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Citigroup i.e., Citigroup and First Bancorp go up and down completely randomly.
Pair Corralation between Citigroup and First Bancorp
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than First Bancorp. However, Citigroup is 1.66 times less risky than First Bancorp. It trades about 0.11 of its potential returns per unit of risk. First Bancorp is currently generating about 0.07 per unit of risk. If you would invest 6,543 in Citigroup on September 13, 2024 and sell it today you would earn a total of 600.00 from holding Citigroup or generate 9.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. First Bancorp
Performance |
| Timeline |
| Citigroup |
| First Bancorp |
Citigroup and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and First Bancorp
The main advantage of trading using opposite Citigroup and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| First Bancorp vs. LINKBANCORP | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. FS Bancorp | First Bancorp vs. Finward Bancorp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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