Correlation Between Citigroup and BMO Equal

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

By analyzing existing cross correlation between Citigroup and BMO Equal Weight, you can compare the effects of market volatilities on Citigroup and BMO Equal 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 BMO Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BMO Equal.

Diversification Opportunities for Citigroup and BMO Equal

0.94

Correlation Coefficient

Citigroup  BMO Equal

Almost no diversification

The 3 months correlation between Citigroup and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight 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 BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of Citigroup i.e., Citigroup and BMO Equal go up and down completely randomly.

Pair Corralation between Citigroup and BMO Equal

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.15 times less return on investment than BMO Equal. In addition to that, Citigroup is 1.04 times more volatile than BMO Equal Weight. It trades about 0.13 of its total potential returns per unit of risk. BMO Equal Weight is currently generating about 0.15 per unit of volatility. If you would invest  2,982  in BMO Equal Weight on September 2, 2024 and sell it today you would earn a total of  575.00  from holding BMO Equal Weight or generate 19.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  BMO Equal Weight

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

BMO Equal Weight

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Equal Weight are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, BMO Equal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and BMO Equal

The main advantage of trading using opposite Citigroup and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BMO Equal 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 BMO Equal will offset losses from the drop in BMO Equal's long position.

The idea behind Citigroup and BMO Equal Weight 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.