Correlation Between Citigroup and Highlands Bankshares

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

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

Diversification Opportunities for Citigroup and Highlands Bankshares

0.88

Correlation Coefficient

Citigroup  Highlands Bankshares

Very poor diversification

The 3 months correlation between Citigroup and Highlands is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares 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 Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of Citigroup i.e., Citigroup and Highlands Bankshares go up and down completely randomly.

Pair Corralation between Citigroup and Highlands Bankshares

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times less return on investment than Highlands Bankshares. In addition to that, Citigroup is 1.35 times more volatile than Highlands Bankshares. It trades about 0.01 of its total potential returns per unit of risk. Highlands Bankshares is currently generating about 0.02 per unit of volatility. If you would invest  3,273  in Highlands Bankshares on September 29, 2024 and sell it today you would earn a total of  9.00  from holding Highlands Bankshares or generate 0.27% return on investment over 90 days.

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

Citigroup  vs.  Highlands Bankshares

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Highlands Bankshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlands Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Highlands Bankshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Highlands Bankshares

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

The idea behind Citigroup and Highlands Bankshares 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.