Correlation Between Knife River and Citizens Community

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

By analyzing existing cross correlation between Knife River and Citizens Community Bancorp, you can compare the effects of market volatilities on Knife River and Citizens Community 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 Knife River with a short position of Citizens Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Citizens Community.

Diversification Opportunities for Knife River and Citizens Community

0.72

Correlation Coefficient

Knife River  Citizens Community

Poor diversification

The 3 months correlation between Knife and Citizens is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Citizens Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Community and Knife River 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 Knife River are associated (or correlated) with Citizens Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Community has no effect on the direction of Knife River i.e., Knife River and Citizens Community go up and down completely randomly.

Pair Corralation between Knife River and Citizens Community

Considering the 90-day investment horizon Knife River is expected to generate 1.91 times more return on investment than Citizens Community. However, Knife River is 1.91 times more volatile than Citizens Community Bancorp. It trades about 0.32 of its potential returns per unit of risk. Citizens Community Bancorp is currently generating about 0.15 per unit of risk. If you would invest  7,948  in Knife River on June 24, 2024 and sell it today you would earn a total of  1,128  from holding Knife River or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Knife River  vs.  Citizens Community Bancorp

Knife River

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Citizens Community

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Community Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Citizens Community demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Citizens Community

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

The idea behind Knife River and Citizens Community Bancorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.