Correlation Between Canadian Imperial and Citigroup

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

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

Diversification Opportunities for Canadian Imperial and Citigroup

0.67

Correlation Coefficient

Canadian Imperial  Citigroup

Poor diversification

The 3 months correlation between Canadian and Citigroup is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Imperial Bank and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Canadian Imperial 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 Canadian Imperial Bank are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Canadian Imperial i.e., Canadian Imperial and Citigroup go up and down completely randomly.

Pair Corralation between Canadian Imperial and Citigroup

Allowing for the 90-day total investment horizon Canadian Imperial is expected to generate 1.17 times less return on investment than Citigroup. But when comparing it to its historical volatility, Canadian Imperial Bank is 2.35 times less risky than Citigroup. It trades about 0.21 of its potential returns per unit of risk. Citigroup is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,209  in Citigroup on August 30, 2024 and sell it today you would earn a total of  807.00  from holding Citigroup or generate 13.0% return on investment over 90 days.

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

Canadian Imperial Bank  vs.  Citigroup

Canadian Imperial Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Pair Trading with Canadian Imperial and Citigroup

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

The idea behind Canadian Imperial Bank and Citigroup 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.