Correlation Between Citigroup and West Shore

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

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

Diversification Opportunities for Citigroup and West Shore

0.69

Correlation Coefficient

Citigroup  West Shore

Poor diversification

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

Pair Corralation between Citigroup and West Shore

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the West Shore. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.12 times less risky than West Shore. The stock trades about -0.03 of its potential returns per unit of risk. The West Shore Bank is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,380  in West Shore Bank on September 23, 2024 and sell it today you would earn a total of  145.00  from holding West Shore Bank or generate 6.09% return on investment over 90 days.

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

Citigroup  vs.  West Shore Bank

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

West Shore Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Shore Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, West Shore is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and West Shore

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

The idea behind Citigroup and West Shore Bank 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.