Correlation Between Citigroup and Canadian Imperial

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

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

Diversification Opportunities for Citigroup and Canadian Imperial

0.74

Correlation Coefficient

Citigroup  Canadian Imperial

Poor diversification

The 3 months correlation between Citigroup and Canadian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank 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 Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Citigroup i.e., Citigroup and Canadian Imperial go up and down completely randomly.

Pair Corralation between Citigroup and Canadian Imperial

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.36 times more return on investment than Canadian Imperial. However, Citigroup is 2.36 times more volatile than Canadian Imperial Bank. It trades about 0.13 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.23 per unit of risk. If you would invest  6,092  in Citigroup on September 1, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

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

Citigroup  vs.  Canadian Imperial Bank

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Canadian Imperial Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Citigroup and Canadian Imperial

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

The idea behind Citigroup and Canadian Imperial Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..