Correlation Between Citigroup and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Citigroup and Washington Mutual 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 Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Washington Mutual Investors, you can compare the effects of market volatilities on Citigroup and Washington Mutual 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 Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Washington Mutual.
Diversification Opportunities for Citigroup and Washington Mutual
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Washington is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual 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 Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Citigroup i.e., Citigroup and Washington Mutual go up and down completely randomly.
Pair Corralation between Citigroup and Washington Mutual
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.43 times more return on investment than Washington Mutual. However, Citigroup is 2.43 times more volatile than Washington Mutual Investors. It trades about 0.07 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.06 per unit of risk. If you would invest 6,064 in Citigroup on September 3, 2024 and sell it today you would earn a total of 1,023 from holding Citigroup or generate 16.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Washington Mutual Investors
Performance |
| Timeline |
| Citigroup |
| Washington Mutual |
Citigroup and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Washington Mutual
The main advantage of trading using opposite Citigroup and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Washington Mutual vs. Vanguard Total Stock | Washington Mutual vs. Vanguard 500 Index | Washington Mutual vs. Vanguard Total Stock | Washington Mutual vs. Vanguard Total Stock |
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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