Correlation Between Bank of New York and Citigroup

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Can any of the company-specific risk be diversified away by investing in both Bank of New York 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 New York 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 New and Citigroup, you can compare the effects of market volatilities on Bank of New York 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 New York with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and Citigroup.

Diversification Opportunities for Bank of New York and Citigroup

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bank and Citigroup is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of New and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Bank of New York 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 New 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 New York i.e., Bank of New York and Citigroup go up and down completely randomly.

Pair Corralation between Bank of New York and Citigroup

Allowing for the 90-day total investment horizon Bank of New York is expected to generate 3.91 times less return on investment than Citigroup. But when comparing it to its historical volatility, Bank Of New is 1.0 times less risky than Citigroup. It trades about 0.18 of its potential returns per unit of risk. Citigroup is currently generating about 0.71 of returns per unit of risk over similar time horizon. If you would invest  5,505  in Citigroup on December 30, 2023 and sell it today you would earn a total of  819.00  from holding Citigroup or generate 14.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bank Of New  vs.  Citigroup

 Performance 
       Timeline  
Bank of New York 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of New are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank of New York may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Citigroup 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of New York and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of New York and Citigroup

The main advantage of trading using opposite Bank of New York and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of New York 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.
The idea behind Bank Of New and Citigroup pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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