Correlation Between Capital One and Citigroup
Can any of the company-specific risk be diversified away by investing in both Capital One and Citigroup 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 Capital One and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Citigroup, you can compare the effects of market volatilities on Capital One and Citigroup 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 Capital One with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Citigroup.
Diversification Opportunities for Capital One and Citigroup
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Citigroup is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Capital One 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 Capital One Financial are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Capital One i.e., Capital One and Citigroup go up and down completely randomly.
Pair Corralation between Capital One and Citigroup
Assuming the 90 days trading horizon Capital One is expected to generate 1.26 times less return on investment than Citigroup. But when comparing it to its historical volatility, Capital One Financial is 1.09 times less risky than Citigroup. It trades about 0.26 of its potential returns per unit of risk. Citigroup is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 147,851 in Citigroup on November 9, 2024 and sell it today you would earn a total of 20,615 from holding Citigroup or generate 13.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Citigroup
Performance |
| Timeline |
| Capital One Financial |
| Citigroup |
Capital One and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Citigroup
The main advantage of trading using opposite Capital One and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.| Capital One vs. Air Transport Services | Capital One vs. Deutsche Bank Aktiengesellschaft | Capital One vs. New Oriental Education | Capital One vs. Cognizant Technology Solutions |
| Citigroup vs. McEwen Mining | Citigroup vs. Southern Copper | Citigroup vs. Genworth Financial | Citigroup vs. KB Home |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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