Correlation Between Citigroup and Business First

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

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

Diversification Opportunities for Citigroup and Business First

0.76

Correlation Coefficient

Citigroup  Business First

Poor diversification

The 3 months correlation between Citigroup and Business is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares 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 Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Citigroup i.e., Citigroup and Business First go up and down completely randomly.

Pair Corralation between Citigroup and Business First

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.98 times more return on investment than Business First. However, Citigroup is 1.02 times less risky than Business First. It trades about 0.04 of its potential returns per unit of risk. Business First Bancshares is currently generating about -0.01 per unit of risk. If you would invest  7,086  in Citigroup on December 26, 2024 and sell it today you would earn a total of  238.00  from holding Citigroup or generate 3.36% return on investment over 90 days.

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

Citigroup  vs.  Business First Bancshares

Citigroup

Risk-Adjusted Performance

Insignificant

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Business First Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Business First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Business First is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Business First

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

The idea behind Citigroup and Business First Bancshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.