Correlation Between Citigroup and Heartland Banccorp

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

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

Diversification Opportunities for Citigroup and Heartland Banccorp

-0.3

Correlation Coefficient

Citigroup  Heartland Banccorp

Very good diversification

The 3 months correlation between Citigroup and Heartland is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp 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 Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Citigroup i.e., Citigroup and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Citigroup and Heartland Banccorp

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.06 times more return on investment than Heartland Banccorp. However, Citigroup is 1.06 times more volatile than Heartland Banccorp. It trades about 0.13 of its potential returns per unit of risk. Heartland Banccorp is currently generating about -0.04 per unit of risk. If you would invest  7,090  in Citigroup on December 1, 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 Against
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

Citigroup  vs.  Heartland Banccorp

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.

Heartland Banccorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Banccorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Heartland Banccorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Heartland Banccorp

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

The idea behind Citigroup and Heartland Banccorp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.