Correlation Between Citizens Financial and First Community

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

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

Diversification Opportunities for Citizens Financial and First Community

-0.45

Correlation Coefficient

Citizens Financial  First Community

Very good diversification

The 3 months correlation between Citizens and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Citizens 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 Citizens Financial Group are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Citizens Financial i.e., Citizens Financial and First Community go up and down completely randomly.

Pair Corralation between Citizens Financial and First Community

Assuming the 90 days trading horizon Citizens Financial is expected to generate 1.92 times less return on investment than First Community. But when comparing it to its historical volatility, Citizens Financial Group is 7.1 times less risky than First Community. It trades about 0.02 of its potential returns per unit of risk. First Community is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,653  in First Community on February 6, 2024 and sell it today you would lose (3.00) from holding First Community or give up 0.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citizens Financial Group  vs.  First Community

Citizens Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

First Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, First Community is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citizens Financial and First Community

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

The idea behind Citizens Financial Group and First Community 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.