Correlation Between City Holding and Columbia Banking

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

By analyzing existing cross correlation between City Holding and Columbia Banking System, you can compare the effects of market volatilities on City Holding and Columbia Banking 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 Columbia Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Holding and Columbia Banking.

Diversification Opportunities for City Holding and Columbia Banking

0.88

Correlation Coefficient

City Holding  Columbia Banking

Very poor diversification

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

Pair Corralation between City Holding and Columbia Banking

Given the investment horizon of 90 days City Holding is expected to generate 2.21 times less return on investment than Columbia Banking. But when comparing it to its historical volatility, City Holding is 1.09 times less risky than Columbia Banking. It trades about 0.08 of its potential returns per unit of risk. Columbia Banking System is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,439  in Columbia Banking System on September 3, 2024 and sell it today you would earn a total of  662.00  from holding Columbia Banking System or generate 27.14% 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.  Columbia Banking System

City Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, City Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Columbia Banking System

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Banking System are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Columbia Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City Holding and Columbia Banking

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

The idea behind City Holding and Columbia Banking System 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.