Correlation Between Citigroup and JP Morgan

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Can any of the company-specific risk be diversified away by investing in both Citigroup and JP Morgan 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 JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and JP Morgan Chase, you can compare the effects of market volatilities on Citigroup and JP Morgan 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 JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and JP Morgan.

Diversification Opportunities for Citigroup and JP Morgan

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and JP Morgan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and JP Morgan Chase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Chase 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 JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Chase has no effect on the direction of Citigroup i.e., Citigroup and JP Morgan go up and down completely randomly.

Pair Corralation between Citigroup and JP Morgan

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.52 times less return on investment than JP Morgan. In addition to that, Citigroup is 1.16 times more volatile than JP Morgan Chase. It trades about 0.02 of its total potential returns per unit of risk. JP Morgan Chase is currently generating about 0.04 per unit of volatility. If you would invest  9,676  in JP Morgan Chase on May 19, 2022 and sell it today you would earn a total of  2,500  from holding JP Morgan Chase or generate 25.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  JP Morgan Chase

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Citigroup Price Channel

JP Morgan Chase 
JP Morgan Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, JP Morgan is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

Citigroup and JP Morgan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and JP Morgan

The main advantage of trading using opposite Citigroup and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, JP Morgan 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 JP Morgan will offset losses from the drop in JP Morgan's long position.
The idea behind Citigroup and JP Morgan Chase 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.
Check out your portfolio center. 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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