Correlation Between Black Hills and CITIGROUP

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

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

Diversification Opportunities for Black Hills and CITIGROUP

-0.22

Correlation Coefficient

Black Hills  CITIGROUP

Very good diversification

The 3 months correlation between Black and CITIGROUP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and CITIGROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP INC and Black Hills 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 Black Hills 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 INC has no effect on the direction of Black Hills i.e., Black Hills and CITIGROUP go up and down completely randomly.

Pair Corralation between Black Hills and CITIGROUP

Considering the 90-day investment horizon Black Hills is expected to generate 2.84 times more return on investment than CITIGROUP. However, Black Hills is 2.84 times more volatile than CITIGROUP INC. It trades about -0.02 of its potential returns per unit of risk. CITIGROUP INC is currently generating about -0.13 per unit of risk. If you would invest  6,206  in Black Hills on December 5, 2024 and sell it today you would lose (132.00) from holding Black Hills or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Black Hills  vs.  CITIGROUP INC

Black Hills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Hills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

CITIGROUP INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIGROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITIGROUP is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Black Hills and CITIGROUP

The main advantage of trading using opposite Black Hills and CITIGROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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 Black Hills and CITIGROUP INC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..