Correlation Between Citigroup and Bank of Punjab

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

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

Diversification Opportunities for Citigroup and Bank of Punjab

0.88

Correlation Coefficient

Citigroup  Bank of Punjab

Very poor diversification

The 3 months correlation between Citigroup and Bank is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bank of Punjab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Punjab 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 Bank of Punjab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Punjab has no effect on the direction of Citigroup i.e., Citigroup and Bank of Punjab go up and down completely randomly.

Pair Corralation between Citigroup and Bank of Punjab

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.1 times less return on investment than Bank of Punjab. But when comparing it to its historical volatility, Citigroup is 6.8 times less risky than Bank of Punjab. It trades about 0.23 of its potential returns per unit of risk. Bank of Punjab is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  669.00  in Bank of Punjab on September 18, 2024 and sell it today you would earn a total of  282.00  from holding Bank of Punjab or generate 42.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Bank of Punjab

Citigroup

Risk-Adjusted Performance

12 of 100

Good

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

Bank of Punjab

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Punjab are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of Punjab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Bank of Punjab

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

The idea behind Citigroup and Bank of Punjab 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.