Correlation Between Main Street and Citizens Bancorp

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

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

Diversification Opportunities for Main Street and Citizens Bancorp

-0.2

Correlation Coefficient

Main Street  Citizens Bancorp

Good diversification

The 3 months correlation between Main and Citizens is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and Citizens Bancorp Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancorp Inv and Main Street 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 Main Street Financial 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 Inv has no effect on the direction of Main Street i.e., Main Street and Citizens Bancorp go up and down completely randomly.

Pair Corralation between Main Street and Citizens Bancorp

Given the investment horizon of 90 days Main Street is expected to generate 3.45 times less return on investment than Citizens Bancorp. But when comparing it to its historical volatility, Main Street Financial is 1.96 times less risky than Citizens Bancorp. It trades about 0.18 of its potential returns per unit of risk. Citizens Bancorp Investment is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Citizens Bancorp Investment on September 21, 2024 and sell it today you would earn a total of  155.00  from holding Citizens Bancorp Investment or generate 6.46% return on investment over 90 days.

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

Main Street Financial  vs.  Citizens Bancorp Investment

Main Street Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Citizens Bancorp Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Bancorp Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Citizens Bancorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Main Street and Citizens Bancorp

The main advantage of trading using opposite Main Street and Citizens Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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 Main Street Financial and Citizens Bancorp Investment 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.