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

0.56

Correlation Coefficient

Royal Bank  Citigroup

Very weak diversification

The 3 months correlation between Royal and Citigroup is 0.56. 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

Assuming the 90 days trading horizon Royal Bank is expected to generate 1.55 times less return on investment than Citigroup. But when comparing it to its historical volatility, Royal Bank of is 1.65 times less risky than Citigroup. It trades about 0.09 of its potential returns per unit of risk. Citigroup is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,960  in Citigroup on September 24, 2024 and sell it today you would earn a total of  1,831  from holding Citigroup or generate 36.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Royal Bank of  vs.  Citigroup

Royal Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 comparatively unsteady basic indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

The idea behind Royal Bank of 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .