Correlation Between BankFirst Capital and Citizens Bancshares

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

Diversification Opportunities for BankFirst Capital and Citizens Bancshares

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between BankFirst and Citizens is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding BankFirst Capital and Citizens Bancshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancshares Corp and BankFirst Capital 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 BankFirst Capital are associated (or correlated) with Citizens Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancshares Corp has no effect on the direction of BankFirst Capital i.e., BankFirst Capital and Citizens Bancshares go up and down completely randomly.

Pair Corralation between BankFirst Capital and Citizens Bancshares

Given the investment horizon of 90 days BankFirst Capital is expected to generate 6.11 times less return on investment than Citizens Bancshares. But when comparing it to its historical volatility, BankFirst Capital is 2.85 times less risky than Citizens Bancshares. It trades about 0.03 of its potential returns per unit of risk. Citizens Bancshares Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,898  in Citizens Bancshares Corp on December 23, 2024 and sell it today you would earn a total of  252.00  from holding Citizens Bancshares Corp or generate 5.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

BankFirst Capital  vs.  Citizens Bancshares Corp

 Performance 
       Timeline  
BankFirst Capital 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankFirst Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Citizens Bancshares Corp 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Bancshares Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Citizens Bancshares is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BankFirst Capital and Citizens Bancshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BankFirst Capital and Citizens Bancshares

The main advantage of trading using opposite BankFirst Capital and Citizens Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BankFirst Capital position performs unexpectedly, Citizens 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 Citizens Bancshares will offset losses from the drop in Citizens Bancshares' long position.
The idea behind BankFirst Capital and Citizens Bancshares Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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