Correlation Between Wells Fargo and Citigroup
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Citigroup, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Citigroup.
Diversification Opportunities for Wells Fargo and Citigroup
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wells and Citigroup is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Citigroup go up and down completely randomly.
Pair Corralation between Wells Fargo and Citigroup
Assuming the 90 days trading horizon Wells Fargo is expected to generate 2.84 times less return on investment than Citigroup. But when comparing it to its historical volatility, Wells Fargo is 1.82 times less risky than Citigroup. It trades about 0.05 of its potential returns per unit of risk. Citigroup is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,206 in Citigroup on August 26, 2024 and sell it today you would earn a total of 2,778 from holding Citigroup or generate 66.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Citigroup
Performance |
| Timeline |
| Wells Fargo |
| Citigroup |
Wells Fargo and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Citigroup
The main advantage of trading using opposite Wells Fargo and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Bank of America | Wells Fargo vs. Bank of America | Wells Fargo vs. China Construction Bank | Wells Fargo vs. Bank of America |
| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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