Correlation Between National Capital and Citizens Bancorp

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

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

Diversification Opportunities for National Capital and Citizens Bancorp

0.07

Correlation Coefficient

National Capital  Citizens Bancorp

Significant diversification

The 3 months correlation between National and Citizens is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank 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 National Capital 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 National Capital Bank 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 National Capital i.e., National Capital and Citizens Bancorp go up and down completely randomly.

Pair Corralation between National Capital and Citizens Bancorp

Given the investment horizon of 90 days National Capital Bank is expected to generate 0.95 times more return on investment than Citizens Bancorp. However, National Capital Bank is 1.06 times less risky than Citizens Bancorp. It trades about 0.21 of its potential returns per unit of risk. Citizens Bancorp Investment is currently generating about 0.06 per unit of risk. If you would invest  5,682  in National Capital Bank on December 30, 2024 and sell it today you would earn a total of  1,318  from holding National Capital Bank or generate 23.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

National Capital Bank  vs.  Citizens Bancorp Investment

National Capital Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Citizens Bancorp Inv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Bancorp Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Citizens Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with National Capital and Citizens Bancorp

The main advantage of trading using opposite National Capital and Citizens Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.