Correlation Between Citizens Financial and Tompkins Financial

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

Diversification Opportunities for Citizens Financial and Tompkins Financial

0.88

Correlation Coefficient

Citizens Financial  Tompkins Financial

Very poor diversification

The 3 months correlation between Citizens and Tompkins is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Tompkins Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tompkins 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 Tompkins Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tompkins Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and Tompkins Financial go up and down completely randomly.

Pair Corralation between Citizens Financial and Tompkins Financial

Given the investment horizon of 90 days Citizens Financial Corp is expected to generate 1.09 times more return on investment than Tompkins Financial. However, Citizens Financial is 1.09 times more volatile than Tompkins Financial. It trades about 0.08 of its potential returns per unit of risk. Tompkins Financial is currently generating about -0.2 per unit of risk. If you would invest  2,345  in Citizens Financial Corp on September 20, 2024 and sell it today you would earn a total of  80.00  from holding Citizens Financial Corp or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

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

Tompkins Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Tompkins Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Tompkins Financial

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

The idea behind Citizens Financial Corp and Tompkins 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.