Correlation Between Citizens Financial and MFS Investment

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and MFS Investment 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 MFS Investment 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 MFS Investment Grade, you can compare the effects of market volatilities on Citizens Financial and MFS Investment 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 MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and MFS Investment.

Diversification Opportunities for Citizens Financial and MFS Investment

-0.08

Correlation Coefficient

Citizens Financial  MFS Investment

Good diversification

The 3 months correlation between Citizens and MFS is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade 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 MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of Citizens Financial i.e., Citizens Financial and MFS Investment go up and down completely randomly.

Pair Corralation between Citizens Financial and MFS Investment

Given the investment horizon of 90 days Citizens Financial Corp is expected to generate 5.26 times more return on investment than MFS Investment. However, Citizens Financial is 5.26 times more volatile than MFS Investment Grade. It trades about 0.07 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.1 per unit of risk. If you would invest  1,808  in Citizens Financial Corp on October 5, 2024 and sell it today you would earn a total of  617.00  from holding Citizens Financial Corp or generate 34.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.75%
Values	Daily Returns

Citizens Financial Corp  vs.  MFS Investment Grade

Citizens Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 11 (%) 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.

MFS Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citizens Financial and MFS Investment

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

The idea behind Citizens Financial Corp and MFS Investment Grade 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.