Correlation Between Banner and City Holding

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

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

Diversification Opportunities for Banner and City Holding

0.76

Correlation Coefficient

Banner  City Holding

Poor diversification

The 3 months correlation between Banner and City is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Banner and City Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Holding and Banner 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 Banner are associated (or correlated) with City Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Holding has no effect on the direction of Banner i.e., Banner and City Holding go up and down completely randomly.

Pair Corralation between Banner and City Holding

Given the investment horizon of 90 days Banner is expected to generate 4.5 times less return on investment than City Holding. In addition to that, Banner is 1.08 times more volatile than City Holding. It trades about 0.01 of its total potential returns per unit of risk. City Holding is currently generating about 0.06 per unit of volatility. If you would invest  11,600  in City Holding on May 7, 2025 and sell it today you would earn a total of  495.00  from holding City Holding or generate 4.27% return on investment over 90 days.

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

Banner  vs.  City Holding

Banner

Risk-Adjusted Performance

Weakest

Over the last 90 days Banner has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Banner is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

City Holding

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in City Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, City Holding is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banner and City Holding

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

The idea behind Banner and City Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.