Correlation Between National Bankshares and Citizens Northern

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

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

Diversification Opportunities for National Bankshares and Citizens Northern

0.09

Correlation Coefficient

National Bankshares  Citizens Northern

Significant diversification

The 3 months correlation between National and Citizens is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares and Citizens Northern Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Northern Corp and National Bankshares 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 Bankshares are associated (or correlated) with Citizens Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Northern Corp has no effect on the direction of National Bankshares i.e., National Bankshares and Citizens Northern go up and down completely randomly.

Pair Corralation between National Bankshares and Citizens Northern

Given the investment horizon of 90 days National Bankshares is expected to under-perform the Citizens Northern. In addition to that, National Bankshares is 1.15 times more volatile than Citizens Northern Corp. It trades about -0.08 of its total potential returns per unit of risk. Citizens Northern Corp is currently generating about 0.04 per unit of volatility. If you would invest  2,047  in Citizens Northern Corp on December 2, 2024 and sell it today you would earn a total of  88.00  from holding Citizens Northern Corp or generate 4.3% return on investment over 90 days.

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

National Bankshares  vs.  Citizens Northern Corp

National Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Citizens Northern Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Northern Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Citizens Northern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Bankshares and Citizens Northern

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

The idea behind National Bankshares and Citizens Northern 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.