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 Corp, 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

0.27

Correlation Coefficient

Farmers  Citizens Financial

Modest diversification

The 3 months correlation between Farmers and Citizens is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Farmers and Merchants 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 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 Corp 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 and Merchants is expected to generate 2.03 times more return on investment than Citizens Financial. However, Farmers is 2.03 times more volatile than Citizens Financial Corp. It trades about 0.34 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.15 per unit of risk. If you would invest  1,475  in Farmers and Merchants on October 16, 2024 and sell it today you would earn a total of  576.00  from holding Farmers and Merchants or generate 39.05% return on investment over 90 days.

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

Farmers and Merchants  vs.  Citizens Financial Corp

Farmers and Merchants

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers and Merchants are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Farmers reported solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting basic indicators, Citizens Financial showed 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 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.