Correlation Between Merrill Lynch and Citigroup Capital
Can any of the company-specific risk be diversified away by investing in both Merrill Lynch and Citigroup Capital 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 Merrill Lynch and Citigroup Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merrill Lynch Capital and Citigroup Capital XIII, you can compare the effects of market volatilities on Merrill Lynch and Citigroup Capital 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 Merrill Lynch with a short position of Citigroup Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrill Lynch and Citigroup Capital.
Diversification Opportunities for Merrill Lynch and Citigroup Capital
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merrill and Citigroup is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch Capital and Citigroup Capital XIII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup Capital XIII and Merrill Lynch 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 Merrill Lynch Capital are associated (or correlated) with Citigroup Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup Capital XIII has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Citigroup Capital go up and down completely randomly.
Pair Corralation between Merrill Lynch and Citigroup Capital
Assuming the 90 days trading horizon Merrill Lynch is expected to generate 2.9 times less return on investment than Citigroup Capital. In addition to that, Merrill Lynch is 1.52 times more volatile than Citigroup Capital XIII. It trades about 0.04 of its total potential returns per unit of risk. Citigroup Capital XIII is currently generating about 0.17 per unit of volatility. If you would invest 3,016 in Citigroup Capital XIII on October 26, 2024 and sell it today you would earn a total of 73.00 from holding Citigroup Capital XIII or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merrill Lynch Capital vs. Citigroup Capital XIII
Performance |
| Timeline |
| Merrill Lynch Capital |
| Citigroup Capital XIII |
Merrill Lynch and Citigroup Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merrill Lynch and Citigroup Capital
The main advantage of trading using opposite Merrill Lynch and Citigroup Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrill Lynch position performs unexpectedly, Citigroup Capital 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 Capital will offset losses from the drop in Citigroup Capital's long position.| Merrill Lynch vs. Citigroup Capital XIII | Merrill Lynch vs. Bank of America | Merrill Lynch vs. Merrill Lynch Depositor | Merrill Lynch vs. ATT Inc |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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