Correlation Between Bank of America and Citigroup
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Citigroup, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Citigroup.
Diversification Opportunities for Bank of America and Citigroup
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Citigroup is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Citigroup go up and down completely randomly.
Pair Corralation between Bank of America and Citigroup
Considering the 90-day investment horizon Bank of America is expected to generate 1.04 times more return on investment than Citigroup. However, Bank of America is 1.04 times more volatile than Citigroup. It trades about -0.08 of its potential returns per unit of risk. Citigroup is currently generating about -0.1 per unit of risk. If you would invest 3,675 in Bank of America on January 20, 2024 and sell it today you would lose (98.00) from holding Bank of America or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Citigroup
Performance |
| Timeline |
| Bank of America |
| Citigroup |
Bank of America and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Citigroup
The main advantage of trading using opposite Bank of America and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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