Correlation Between Citigroup and Citizens Northern

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

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

Diversification Opportunities for Citigroup and Citizens Northern

0.65

Correlation Coefficient

Citigroup  Citizens Northern

Poor diversification

The 3 months correlation between Citigroup and Citizens is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Citizens Northern Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Northern Corp 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 Citizens Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Northern Corp has no effect on the direction of Citigroup i.e., Citigroup and Citizens Northern go up and down completely randomly.

Pair Corralation between Citigroup and Citizens Northern

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.81 times more return on investment than Citizens Northern. However, Citigroup is 1.24 times less risky than Citizens Northern. It trades about 0.13 of its potential returns per unit of risk. Citizens Northern Corp is currently generating about 0.04 per unit of risk. If you would invest  7,090  in Citigroup on December 2, 2024 and sell it today you would earn a total of  905.00  from holding Citigroup or generate 12.76% return on investment over 90 days.

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

Citigroup  vs.  Citizens Northern Corp

Citigroup

Risk-Adjusted Performance

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.

Citizens Northern Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Northern Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Citizens Northern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Citizens Northern

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

The idea behind Citigroup and Citizens Northern Corp 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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.