Correlation Between First Community and Citizens Financial

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

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

Diversification Opportunities for First Community and Citizens Financial

-0.61

Correlation Coefficient

First Community  Citizens Financial

Excellent diversification

The 3 months correlation between First and Citizens is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial 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 First Community 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 First Community Financial 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 First Community i.e., First Community and Citizens Financial go up and down completely randomly.

Pair Corralation between First Community and Citizens Financial

Given the investment horizon of 90 days First Community Financial is expected to under-perform the Citizens Financial. In addition to that, First Community is 1.8 times more volatile than Citizens Financial Corp. It trades about -0.1 of its total potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.06 per unit of volatility. If you would invest  2,675  in Citizens Financial Corp on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Citizens Financial Corp or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.61%
Values	Daily Returns

First Community Financial  vs.  Citizens Financial Corp

First Community Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Citizens Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Community and Citizens Financial

The main advantage of trading using opposite First Community and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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 First Community Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.