Correlation Between Citigroup and BMO Short

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

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

Diversification Opportunities for Citigroup and BMO Short

-0.04

Correlation Coefficient

Citigroup  BMO Short

Good diversification

The 3 months correlation between Citigroup and BMO is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BMO Short Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Federal 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 BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Federal has no effect on the direction of Citigroup i.e., Citigroup and BMO Short go up and down completely randomly.

Pair Corralation between Citigroup and BMO Short

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.07 times more return on investment than BMO Short. However, Citigroup is 20.07 times more volatile than BMO Short Federal. It trades about 0.04 of its potential returns per unit of risk. BMO Short Federal is currently generating about 0.29 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  BMO Short Federal

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

BMO Short Federal

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Short Federal are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BMO Short is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and BMO Short

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

The idea behind Citigroup and BMO Short Federal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.