Correlation Between Citigroup and Red River

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

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

Diversification Opportunities for Citigroup and Red River

0.88

Correlation Coefficient

Citigroup  Red River

Very poor diversification

The 3 months correlation between Citigroup and Red is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Citigroup i.e., Citigroup and Red River go up and down completely randomly.

Pair Corralation between Citigroup and Red River

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.02 times less return on investment than Red River. In addition to that, Citigroup is 1.04 times more volatile than Red River Bancshares. It trades about 0.14 of its total potential returns per unit of risk. Red River Bancshares is currently generating about 0.15 per unit of volatility. If you would invest  5,094  in Red River Bancshares on September 4, 2024 and sell it today you would earn a total of  968.00  from holding Red River Bancshares or generate 19.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Red River Bancshares

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Red River Bancshares

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red River Bancshares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Red River demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Red River

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

The idea behind Citigroup and Red River 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.