Correlation Between Citigroup and Community Trust

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

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

Diversification Opportunities for Citigroup and Community Trust

0.92

Correlation Coefficient

Citigroup  Community Trust

Almost no diversification

The 3 months correlation between Citigroup and Community is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp 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 Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of Citigroup i.e., Citigroup and Community Trust go up and down completely randomly.

Pair Corralation between Citigroup and Community Trust

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.22 times less return on investment than Community Trust. But when comparing it to its historical volatility, Citigroup is 1.33 times less risky than Community Trust. It trades about 0.13 of its potential returns per unit of risk. Community Trust Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,932  in Community Trust Bancorp on September 2, 2024 and sell it today you would earn a total of  966.00  from holding Community Trust Bancorp or generate 19.59% return on investment over 90 days.

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

Citigroup  vs.  Community Trust Bancorp

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Community Trust Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community Trust Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Community Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Community Trust

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

The idea behind Citigroup and Community Trust Bancorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.