Correlation Between Citizens Financial and Home Bancorp

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

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

Diversification Opportunities for Citizens Financial and Home Bancorp

0.77

Correlation Coefficient

Citizens Financial  Home Bancorp

Poor diversification

The 3 months correlation between Citizens and Home is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Services and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home 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 Services are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and Home Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and Home Bancorp

Given the investment horizon of 90 days Citizens Financial Services is expected to under-perform the Home Bancorp. In addition to that, Citizens Financial is 1.47 times more volatile than Home Bancorp. It trades about -0.28 of its total potential returns per unit of risk. Home Bancorp is currently generating about -0.27 per unit of volatility. If you would invest  4,951  in Home Bancorp on October 11, 2024 and sell it today you would lose (519.00) from holding Home Bancorp or give up 10.48% of portfolio value over 90 days.

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

Citizens Financial Services  vs.  Home Bancorp

Citizens Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Home Bancorp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Home Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citizens Financial and Home Bancorp

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

The idea behind Citizens Financial Services and Home 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.