Correlation Between HMN Financial and Citigroup

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Can any of the company-specific risk be diversified away by investing in both HMN Financial and Citigroup 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 HMN Financial and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Citigroup, you can compare the effects of market volatilities on HMN Financial and Citigroup 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 HMN Financial with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Citigroup.

Diversification Opportunities for HMN Financial and Citigroup

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HMN and Citigroup is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and HMN Financial 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 HMN Financial are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of HMN Financial i.e., HMN Financial and Citigroup go up and down completely randomly.

Pair Corralation between HMN Financial and Citigroup

Given the investment horizon of 90 days HMN Financial is expected to generate 1.98 times less return on investment than Citigroup. In addition to that, HMN Financial is 1.86 times more volatile than Citigroup. It trades about 0.16 of its total potential returns per unit of risk. Citigroup is currently generating about 0.58 per unit of volatility. If you would invest  5,571  in Citigroup on December 29, 2023 and sell it today you would earn a total of  753.00  from holding Citigroup or generate 13.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HMN Financial  vs.  Citigroup

 Performance 
       Timeline  
HMN Financial 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

HMN Financial and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HMN Financial and Citigroup

The main advantage of trading using opposite HMN Financial and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.
The idea behind HMN Financial and Citigroup 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.
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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