Correlation Between City Holding and Banner
Can any of the company-specific risk be diversified away by investing in both City Holding and Banner 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 City Holding and Banner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Holding and Banner, you can compare the effects of market volatilities on City Holding and Banner 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 City Holding with a short position of Banner. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Holding and Banner.
Diversification Opportunities for City Holding and Banner
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between City and Banner is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding City Holding and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and City Holding 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 City Holding are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of City Holding i.e., City Holding and Banner go up and down completely randomly.
Pair Corralation between City Holding and Banner
Given the investment horizon of 90 days City Holding is expected to generate 10.73 times less return on investment than Banner. But when comparing it to its historical volatility, City Holding is 1.18 times less risky than Banner. It trades about 0.01 of its potential returns per unit of risk. Banner is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,835 in Banner on November 2, 2024 and sell it today you would earn a total of 1,272 from holding Banner or generate 21.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Holding vs. Banner
Performance |
| Timeline |
| City Holding |
| Banner |
City Holding and Banner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Holding and Banner
The main advantage of trading using opposite City Holding and Banner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Holding position performs unexpectedly, Banner 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 Banner will offset losses from the drop in Banner's long position.| City Holding vs. Community West Bancshares | City Holding vs. Oak Valley Bancorp | City Holding vs. Home Federal Bancorp | City Holding vs. Magyar Bancorp |
| Banner vs. BancFirst | Banner vs. City Holding | Banner vs. Columbia Banking System | Banner vs. CVB Financial |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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