Correlation Between Citigroup and Bank of America

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Citigroup and Bank of America 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 Citigroup and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Bank of America, you can compare the effects of market volatilities on Citigroup and Bank of America 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 Citigroup with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Bank of America.

Diversification Opportunities for Citigroup and Bank of America

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Citigroup and Bank is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Citigroup 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 Citigroup are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Citigroup i.e., Citigroup and Bank of America go up and down completely randomly.

Pair Corralation between Citigroup and Bank of America

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.44 times more return on investment than Bank of America. However, Citigroup is 2.44 times more volatile than Bank of America. It trades about 0.17 of its potential returns per unit of risk. Bank of America is currently generating about -0.07 per unit of risk. If you would invest  5,857  in Citigroup on September 6, 2024 and sell it today you would earn a total of  1,293  from holding Citigroup or generate 22.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Bank of America

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Bank of America 

Risk-Adjusted Performance

0 of 100

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

Citigroup and Bank of America Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Bank of America

The main advantage of trading using opposite Citigroup and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.
The idea behind Citigroup and Bank of America 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

Other Complementary Tools

Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Transaction History
View history of all your transactions and understand their impact on performance
Bonds Directory
Find actively traded corporate debentures issued by US companies
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm