Correlation Between Citizens Financial and Oak Ridge

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

By analyzing existing cross correlation between Citizens Financial Corp and Oak Ridge Financial, you can compare the effects of market volatilities on Citizens Financial and Oak Ridge 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 Oak Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Oak Ridge.

Diversification Opportunities for Citizens Financial and Oak Ridge

0.8

Correlation Coefficient

Citizens Financial  Oak Ridge

Very poor diversification

The 3 months correlation between Citizens and Oak is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Oak Ridge Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Financial 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 Corp are associated (or correlated) with Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and Oak Ridge go up and down completely randomly.

Pair Corralation between Citizens Financial and Oak Ridge

Given the investment horizon of 90 days Citizens Financial Corp is expected to under-perform the Oak Ridge. In addition to that, Citizens Financial is 2.73 times more volatile than Oak Ridge Financial. It trades about -0.09 of its total potential returns per unit of risk. Oak Ridge Financial is currently generating about 0.15 per unit of volatility. If you would invest  2,025  in Oak Ridge Financial on September 22, 2024 and sell it today you would earn a total of  35.00  from holding Oak Ridge Financial or generate 1.73% return on investment over 90 days.

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

Citizens Financial Corp  vs.  Oak Ridge Financial

Citizens Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Oak Ridge Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Ridge Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Oak Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citizens Financial and Oak Ridge

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

The idea behind Citizens Financial Corp and Oak Ridge Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.