Correlation Between Canadian Imperial and Citigroup

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Can any of the company-specific risk be diversified away by investing in both Canadian Imperial 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 Canadian Imperial and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Imperial Bank and Citigroup, you can compare the effects of market volatilities on Canadian Imperial 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 Canadian Imperial with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Imperial and Citigroup.

Diversification Opportunities for Canadian Imperial and Citigroup

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Canadian and Citigroup is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Canadian Imperial 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 Canadian Imperial Bank 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 Canadian Imperial i.e., Canadian Imperial and Citigroup go up and down completely randomly.

Pair Corralation between Canadian Imperial and Citigroup

Allowing for the 90-day total investment horizon Canadian Imperial is expected to generate 1.67 times less return on investment than Citigroup. But when comparing it to its historical volatility, Canadian Imperial Bank is 1.09 times less risky than Citigroup. It trades about 0.07 of its potential returns per unit of risk. Citigroup is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,466  in Citigroup on December 29, 2023 and sell it today you would earn a total of  1,809  from holding Citigroup or generate 40.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Canadian Imperial Bank  vs.  Citigroup

 Performance 
       Timeline  
Canadian Imperial Bank 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Canadian Imperial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Canadian Imperial and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian Imperial and Citigroup

The main advantage of trading using opposite Canadian Imperial and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Imperial 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 Canadian Imperial Bank 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.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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