Correlation Between Merrill Lynch and Citigroup Capital

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

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

Diversification Opportunities for Merrill Lynch and Citigroup Capital

-0.72

Correlation Coefficient

Merrill Lynch  Citigroup Capital

Pay attention - limited upside

The 3 months correlation between Merrill and Citigroup is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch Depositor and Citigroup Capital XIII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup Capital XIII and Merrill Lynch 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 Merrill Lynch Depositor are associated (or correlated) with Citigroup Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup Capital XIII has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Citigroup Capital go up and down completely randomly.

Pair Corralation between Merrill Lynch and Citigroup Capital

Considering the 90-day investment horizon Merrill Lynch is expected to generate 1.2 times less return on investment than Citigroup Capital. In addition to that, Merrill Lynch is 3.73 times more volatile than Citigroup Capital XIII. It trades about 0.05 of its total potential returns per unit of risk. Citigroup Capital XIII is currently generating about 0.22 per unit of volatility. If you would invest  2,785  in Citigroup Capital XIII on September 2, 2024 and sell it today you would earn a total of  250.00  from holding Citigroup Capital XIII or generate 8.98% return on investment over 90 days.

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

Merrill Lynch Depositor  vs.  Citigroup Capital XIII

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Citigroup Capital XIII

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup Capital XIII are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Citigroup Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Merrill Lynch and Citigroup Capital

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

The idea behind Merrill Lynch Depositor and Citigroup Capital XIII 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.