Correlation Between Bank of Montreal and Citigroup

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

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

Diversification Opportunities for Bank of Montreal and Citigroup

0.78

Correlation Coefficient

Bank of Montreal  Citigroup

Poor diversification

The 3 months correlation between Bank and Citigroup is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal i.e., Bank of Montreal and Citigroup go up and down completely randomly.

Pair Corralation between Bank of Montreal and Citigroup

Considering the 90-day investment horizon Bank of Montreal is expected to generate 0.44 times more return on investment than Citigroup. However, Bank of Montreal is 2.3 times less risky than Citigroup. It trades about 0.26 of its potential returns per unit of risk. Citigroup is currently generating about 0.11 per unit of risk. If you would invest  8,262  in Bank of Montreal on August 30, 2024 and sell it today you would earn a total of  1,234  from holding Bank of Montreal or generate 14.94% return on investment over 90 days.

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

Bank of Montreal  vs.  Citigroup

Bank of Montreal

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Bank of Montreal displayed solid returns over the last few months and may actually be approaching a breakup point.

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 rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and Citigroup

The main advantage of trading using opposite Bank of Montreal and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal 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 Bank of Montreal 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.