Correlation Between Farmers and Citizens Financial

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

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

Diversification Opportunities for Farmers and Citizens Financial

0.82

Correlation Coefficient

Farmers  Citizens Financial

Very poor diversification

The 3 months correlation between Farmers and Citizens is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and Citizens Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Farmers 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 Farmers And Merchants 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 has no effect on the direction of Farmers i.e., Farmers and Citizens Financial go up and down completely randomly.

Pair Corralation between Farmers and Citizens Financial

Given the investment horizon of 90 days Farmers is expected to generate 2.44 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, Farmers And Merchants is 5.46 times less risky than Citizens Financial. It trades about 0.35 of its potential returns per unit of risk. Citizens Financial Services is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,074  in Citizens Financial Services on September 3, 2024 and sell it today you would earn a total of  1,987  from holding Citizens Financial Services or generate 39.16% return on investment over 90 days.

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

Farmers And Merchants  vs.  Citizens Financial Services

Farmers And Merchants

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Farmers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Citizens Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers and Citizens Financial

The main advantage of trading using opposite Farmers and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers 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 Farmers And Merchants and Citizens Financial Services 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.