Correlation Between Citizens Financial and Home Federal

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

Diversification Opportunities for Citizens Financial and Home Federal

-0.17

Correlation Coefficient

Citizens Financial  Home Federal

Good diversification

The 3 months correlation between Citizens and Home is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and Home Federal go up and down completely randomly.

Pair Corralation between Citizens Financial and Home Federal

Given the investment horizon of 90 days Citizens Financial is expected to generate 12.44 times less return on investment than Home Federal. But when comparing it to its historical volatility, Citizens Financial Corp is 15.35 times less risky than Home Federal. It trades about 0.05 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,711  in Home Federal Bancorp on September 20, 2024 and sell it today you would lose (451.00) from holding Home Federal Bancorp or give up 26.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.12%
Values	Daily Returns

Citizens Financial Corp  vs.  Home Federal Bancorp

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 weak basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Citizens Financial and Home Federal

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

The idea behind Citizens Financial Corp and Home Federal Bancorp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..