Correlation Between Royal Bank and CITIGROUP CDR

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

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

Diversification Opportunities for Royal Bank and CITIGROUP CDR

0.95

Correlation Coefficient

Royal Bank  CITIGROUP CDR

Almost no diversification

The 3 months correlation between Royal and CITIGROUP is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and CITIGROUP CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP CDR and Royal Bank 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 Royal Bank of are associated (or correlated) with CITIGROUP CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIGROUP CDR has no effect on the direction of Royal Bank i.e., Royal Bank and CITIGROUP CDR go up and down completely randomly.

Pair Corralation between Royal Bank and CITIGROUP CDR

Assuming the 90 days trading horizon Royal Bank is expected to generate 11.19 times less return on investment than CITIGROUP CDR. But when comparing it to its historical volatility, Royal Bank of is 7.07 times less risky than CITIGROUP CDR. It trades about 0.23 of its potential returns per unit of risk. CITIGROUP CDR is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  2,859  in CITIGROUP CDR on April 24, 2025 and sell it today you would earn a total of  1,160  from holding CITIGROUP CDR or generate 40.57% return on investment over 90 days.

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

Royal Bank of  vs.  CITIGROUP CDR

Royal Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CITIGROUP CDR

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CITIGROUP CDR are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, CITIGROUP CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Bank and CITIGROUP CDR

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

The idea behind Royal Bank of and CITIGROUP CDR 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.