Correlation Between Citigroup and Northwest Bancshares
Can any of the company-specific risk be diversified away by investing in both Citigroup and Northwest Bancshares 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 Northwest Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Northwest Bancshares, you can compare the effects of market volatilities on Citigroup and Northwest Bancshares 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 Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Northwest Bancshares.
Diversification Opportunities for Citigroup and Northwest Bancshares
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Northwest is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares 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 Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of Citigroup i.e., Citigroup and Northwest Bancshares go up and down completely randomly.
Pair Corralation between Citigroup and Northwest Bancshares
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.25 times less return on investment than Northwest Bancshares. But when comparing it to its historical volatility, Citigroup is 1.61 times less risky than Northwest Bancshares. It trades about 0.21 of its potential returns per unit of risk. Northwest Bancshares is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,330 in Northwest Bancshares on August 29, 2024 and sell it today you would earn a total of 154.00 from holding Northwest Bancshares or generate 11.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Northwest Bancshares
Performance |
| Timeline |
| Citigroup |
| Northwest Bancshares |
Citigroup and Northwest Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Northwest Bancshares
The main advantage of trading using opposite Citigroup and Northwest Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Northwest Bancshares 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 Northwest Bancshares will offset losses from the drop in Northwest Bancshares' long position.The idea behind Citigroup and Northwest Bancshares 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.| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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