Correlation Between Citigroup and Northwest Bancshares

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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

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and Northwest is 0.5. 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 2.59 times more return on investment than Northwest Bancshares. However, Citigroup is 2.59 times more volatile than Northwest Bancshares. It trades about 0.2 of its potential returns per unit of risk. Northwest Bancshares is currently generating about 0.51 per unit of risk. If you would invest  4,574  in Citigroup on May 11, 2022 and sell it today you would earn a total of  635.00  from holding Citigroup or generate 13.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Northwest Bancshares

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Citigroup Price Channel

Northwest Bancshares 
Northwest Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Northwest Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Northwest Price Channel

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

Pair trading matchups for Northwest 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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