Correlation Between MF Bancorp and Citizens Bancshares

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

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

Diversification Opportunities for MF Bancorp and Citizens Bancshares

-0.23

Correlation Coefficient

MF Bancorp  Citizens Bancshares

Very good diversification

The 3 months correlation between MFBP and Citizens is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and Citizens Bancshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancshares Corp and MF Bancorp 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 MF Bancorp are associated (or correlated) with Citizens Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancshares Corp has no effect on the direction of MF Bancorp i.e., MF Bancorp and Citizens Bancshares go up and down completely randomly.

Pair Corralation between MF Bancorp and Citizens Bancshares

Given the investment horizon of 90 days MF Bancorp is expected to under-perform the Citizens Bancshares. In addition to that, MF Bancorp is 1.13 times more volatile than Citizens Bancshares Corp. It trades about -0.06 of its total potential returns per unit of risk. Citizens Bancshares Corp is currently generating about 0.1 per unit of volatility. If you would invest  4,825  in Citizens Bancshares Corp on August 30, 2024 and sell it today you would earn a total of  515.00  from holding Citizens Bancshares Corp or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

MF Bancorp  vs.  Citizens Bancshares Corp

MF Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MF Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Citizens Bancshares Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Bancshares Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Citizens Bancshares may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with MF Bancorp and Citizens Bancshares

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

The idea behind MF Bancorp and Citizens Bancshares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.