Correlation Between Citigroup and BCE

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

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

Diversification Opportunities for Citigroup and BCE

-0.7

Correlation Coefficient

Citigroup  BCE

Excellent diversification

The 3 months correlation between Citigroup and BCE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Citigroup i.e., Citigroup and BCE go up and down completely randomly.

Pair Corralation between Citigroup and BCE

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.54 times less return on investment than BCE. In addition to that, Citigroup is 2.56 times more volatile than BCE Inc Pref. It trades about 0.02 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.12 per unit of volatility. If you would invest  1,593  in BCE Inc Pref on September 25, 2024 and sell it today you would earn a total of  22.00  from holding BCE Inc Pref or generate 1.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  BCE Inc Pref

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

BCE Inc Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, BCE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and BCE

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

The idea behind Citigroup and BCE Inc Pref 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.