Correlation Between Citigroup and Traditions Bank
Can any of the company-specific risk be diversified away by investing in both Citigroup and Traditions Bank 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 Traditions Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Traditions Bank, you can compare the effects of market volatilities on Citigroup and Traditions Bank 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 Traditions Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Traditions Bank.
Diversification Opportunities for Citigroup and Traditions Bank
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Traditions is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions Bank 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 Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of Citigroup i.e., Citigroup and Traditions Bank go up and down completely randomly.
Pair Corralation between Citigroup and Traditions Bank
Taking into account the 90-day investment horizon Citigroup is expected to generate 5.01 times less return on investment than Traditions Bank. But when comparing it to its historical volatility, Citigroup is 2.96 times less risky than Traditions Bank. It trades about 0.07 of its potential returns per unit of risk. Traditions Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,686 in Traditions Bank on September 1, 2024 and sell it today you would earn a total of 1,813 from holding Traditions Bank or generate 107.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Traditions Bank
Performance |
| Timeline |
| Citigroup |
| Traditions Bank |
Citigroup and Traditions Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Traditions Bank
The main advantage of trading using opposite Citigroup and Traditions Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Traditions Bank 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 Traditions Bank will offset losses from the drop in Traditions Bank's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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