Correlation Between Western Asset and Citizens Bancorp

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

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

Diversification Opportunities for Western Asset and Citizens Bancorp

-0.58

Correlation Coefficient

Western Asset  Citizens Bancorp

Excellent diversification

The 3 months correlation between Western and Citizens is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Citizens Bancorp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancorp and Western Asset 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 Western Asset Global are associated (or correlated) with Citizens Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancorp has no effect on the direction of Western Asset i.e., Western Asset and Citizens Bancorp go up and down completely randomly.

Pair Corralation between Western Asset and Citizens Bancorp

Considering the 90-day investment horizon Western Asset Global is expected to generate 0.43 times more return on investment than Citizens Bancorp. However, Western Asset Global is 2.33 times less risky than Citizens Bancorp. It trades about 0.02 of its potential returns per unit of risk. Citizens Bancorp of is currently generating about -0.05 per unit of risk. If you would invest  1,130  in Western Asset Global on November 29, 2024 and sell it today you would earn a total of  8.00  from holding Western Asset Global or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

Western Asset Global  vs.  Citizens Bancorp of

Western Asset Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Citizens Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Bancorp of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Citizens Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Asset and Citizens Bancorp

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

The idea behind Western Asset Global and Citizens Bancorp of 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.