Correlation Between Citigroup and BMO Global

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

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

Diversification Opportunities for Citigroup and BMO Global

-0.12

Correlation Coefficient

Citigroup  BMO Global

Good diversification

The 3 months correlation between Citigroup and BMO is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BMO Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Infrastructure 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Infrastructure has no effect on the direction of Citigroup i.e., Citigroup and BMO Global go up and down completely randomly.

Pair Corralation between Citigroup and BMO Global

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times less return on investment than BMO Global. In addition to that, Citigroup is 1.99 times more volatile than BMO Global Infrastructure. It trades about 0.03 of its total potential returns per unit of risk. BMO Global Infrastructure is currently generating about 0.09 per unit of volatility. If you would invest  5,096  in BMO Global Infrastructure on December 28, 2024 and sell it today you would earn a total of  279.00  from holding BMO Global Infrastructure or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  BMO Global Infrastructure

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BMO Global Infrastructure

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Infrastructure are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and BMO Global

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

The idea behind Citigroup and BMO Global Infrastructure 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.