Correlation Between JPMorgan Chase and Citigroup

Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase 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 JPMorgan Chase and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JPMorgan Chase Co and Citigroup, you can compare the effects of market volatilities on JPMorgan Chase 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 JPMorgan Chase with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Citigroup.

Diversification Opportunities for JPMorgan Chase and Citigroup

-0.69

Correlation Coefficient

JPMorgan Chase  Citigroup

Excellent diversification

The 3 months correlation between JPMorgan and Citigroup is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and JPMorgan Chase 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 JPMorgan Chase Co 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 JPMorgan Chase i.e., JPMorgan Chase and Citigroup go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Citigroup

Assuming the 90 days trading horizon JPMorgan Chase Co is expected to under-perform the Citigroup. But the preferred stock apears to be less risky and, when comparing its historical volatility, JPMorgan Chase Co is 2.15 times less risky than Citigroup. The preferred stock trades about -0.19 of its potential returns per unit of risk. The Citigroup is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,083  in Citigroup on August 25, 2024 and sell it today you would earn a total of  901.00  from holding Citigroup or generate 14.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

JPMorgan Chase Co  vs.  Citigroup

JPMorgan Chase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Chase Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, JPMorgan Chase is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Citigroup

The main advantage of trading using opposite JPMorgan Chase and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase 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 JPMorgan Chase Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.