Correlation Between Citigroup and Lake Shore

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

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

Diversification Opportunities for Citigroup and Lake Shore

0.69

Correlation Coefficient

Citigroup  Lake Shore

Poor diversification

The 3 months correlation between Citigroup and Lake is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore 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 Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of Citigroup i.e., Citigroup and Lake Shore go up and down completely randomly.

Pair Corralation between Citigroup and Lake Shore

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.87 times less return on investment than Lake Shore. But when comparing it to its historical volatility, Citigroup is 1.99 times less risky than Lake Shore. It trades about 0.13 of its potential returns per unit of risk. Lake Shore Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,330  in Lake Shore Bancorp on November 28, 2024 and sell it today you would earn a total of  245.00  from holding Lake Shore Bancorp or generate 18.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.05%
Values	Daily Returns

Citigroup  vs.  Lake Shore Bancorp

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.

Lake Shore Bancorp

Risk-Adjusted Performance

OK

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

Pair Trading with Citigroup and Lake Shore

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

The idea behind Citigroup and Lake Shore 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.