Correlation Between Citigroup and Nicolet Bankshares
Can any of the company-specific risk be diversified away by investing in both Citigroup and Nicolet 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 Nicolet Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Nicolet Bankshares, you can compare the effects of market volatilities on Citigroup and Nicolet 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 Nicolet Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Nicolet Bankshares.
Diversification Opportunities for Citigroup and Nicolet Bankshares
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Nicolet is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nicolet Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicolet 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 Nicolet Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicolet Bankshares has no effect on the direction of Citigroup i.e., Citigroup and Nicolet Bankshares go up and down completely randomly.
Pair Corralation between Citigroup and Nicolet Bankshares
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.16 times less return on investment than Nicolet Bankshares. But when comparing it to its historical volatility, Citigroup is 1.2 times less risky than Nicolet Bankshares. It trades about 0.07 of its potential returns per unit of risk. Nicolet Bankshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,854 in Nicolet Bankshares on September 3, 2024 and sell it today you would earn a total of 3,327 from holding Nicolet Bankshares or generate 42.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Nicolet Bankshares
Performance |
| Timeline |
| Citigroup |
| Nicolet Bankshares |
Citigroup and Nicolet Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Nicolet Bankshares
The main advantage of trading using opposite Citigroup and Nicolet Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Nicolet 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 Nicolet Bankshares will offset losses from the drop in Nicolet Bankshares' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Nicolet Bankshares vs. Old Second Bancorp | Nicolet Bankshares vs. Fidelity DD Bancorp | Nicolet Bankshares vs. BancFirst | Nicolet Bankshares vs. Affinity Bancshares |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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