Correlation Between Citizens Financial and Katahdin Bankshares

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

Diversification Opportunities for Citizens Financial and Katahdin Bankshares

0.83

Correlation Coefficient

Citizens Financial  Katahdin Bankshares

Very poor diversification

The 3 months correlation between Citizens and Katahdin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Katahdin Bankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katahdin Bankshares Corp 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 Katahdin Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katahdin Bankshares Corp has no effect on the direction of Citizens Financial i.e., Citizens Financial and Katahdin Bankshares go up and down completely randomly.

Pair Corralation between Citizens Financial and Katahdin Bankshares

Given the investment horizon of 90 days Citizens Financial Corp is expected to generate 1.22 times more return on investment than Katahdin Bankshares. However, Citizens Financial is 1.22 times more volatile than Katahdin Bankshares Corp. It trades about 0.05 of its potential returns per unit of risk. Katahdin Bankshares Corp is currently generating about 0.03 per unit of risk. If you would invest  1,672  in Citizens Financial Corp on October 6, 2024 and sell it today you would earn a total of  753.00  from holding Citizens Financial Corp or generate 45.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.08%
Values	Daily Returns

Citizens Financial Corp  vs.  Katahdin Bankshares Corp

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.

Katahdin Bankshares Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Katahdin Bankshares Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Katahdin Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Katahdin Bankshares

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

The idea behind Citizens Financial Corp and Katahdin Bankshares 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.