Correlation Between Royal Bank and Citigroup
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Citigroup, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Citigroup.
Diversification Opportunities for Royal Bank and Citigroup
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Citigroup is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Citigroup go up and down completely randomly.
Pair Corralation between Royal Bank and Citigroup
Allowing for the 90-day total investment horizon Royal Bank of is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, Royal Bank of is 1.43 times less risky than Citigroup. The stock trades about -0.03 of its potential returns per unit of risk. The Citigroup is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6,173 in Citigroup on February 6, 2024 and sell it today you would lose (21.00) from holding Citigroup or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Citigroup
Performance |
| Timeline |
| Royal Bank |
| Citigroup |
Royal Bank and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Citigroup
The main advantage of trading using opposite Royal Bank and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. Canadian Imperial Bank | Royal Bank vs. Bank of Montreal | Royal Bank vs. Bank of Nova | Royal Bank vs. Bank of America |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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