Correlation Between Citigroup and BankUnited

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

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

Diversification Opportunities for Citigroup and BankUnited

0.87

Correlation Coefficient

Citigroup  BankUnited

Very poor diversification

The 3 months correlation between Citigroup and BankUnited is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited 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 BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of Citigroup i.e., Citigroup and BankUnited go up and down completely randomly.

Pair Corralation between Citigroup and BankUnited

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.3 times less return on investment than BankUnited. But when comparing it to its historical volatility, Citigroup is 1.41 times less risky than BankUnited. It trades about 0.09 of its potential returns per unit of risk. BankUnited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,666  in BankUnited on October 7, 2024 and sell it today you would earn a total of  1,208  from holding BankUnited or generate 45.31% return on investment over 90 days.

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

Citigroup  vs.  BankUnited

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

BankUnited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, BankUnited may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and BankUnited

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

The idea behind Citigroup and BankUnited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.