Correlation Between Eagle Financial and Citizens Financial

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

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

Diversification Opportunities for Eagle Financial and Citizens Financial

0.68

Correlation Coefficient

Eagle Financial  Citizens Financial

Poor diversification

The 3 months correlation between Eagle and Citizens is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp and Eagle 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 Eagle Financial Services are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Eagle Financial i.e., Eagle Financial and Citizens Financial go up and down completely randomly.

Pair Corralation between Eagle Financial and Citizens Financial

Given the investment horizon of 90 days Eagle Financial is expected to generate 4.02 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, Eagle Financial Services is 1.86 times less risky than Citizens Financial. It trades about 0.04 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,880  in Citizens Financial Corp on September 14, 2024 and sell it today you would earn a total of  545.00  from holding Citizens Financial Corp or generate 28.99% return on investment over 90 days.

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

Eagle Financial Services  vs.  Citizens Financial Corp

Eagle Financial Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Eagle Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citizens Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Financial and Citizens Financial

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

The idea behind Eagle Financial Services and Citizens Financial 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.