Correlation Between Southern BancShares and Citizens Financial

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

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

Diversification Opportunities for Southern BancShares and Citizens Financial

0.76

Correlation Coefficient

Southern BancShares  Citizens Financial

Poor diversification

The 3 months correlation between Southern and Citizens is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Southern BancShares NC and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp and Southern BancShares 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 Southern BancShares NC are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Southern BancShares i.e., Southern BancShares and Citizens Financial go up and down completely randomly.

Pair Corralation between Southern BancShares and Citizens Financial

Given the investment horizon of 90 days Southern BancShares NC is expected to generate 0.65 times more return on investment than Citizens Financial. However, Southern BancShares NC is 1.53 times less risky than Citizens Financial. It trades about 0.08 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.04 per unit of risk. If you would invest  490,200  in Southern BancShares NC on October 4, 2024 and sell it today you would earn a total of  319,800  from holding Southern BancShares NC or generate 65.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.6%
Values	Daily Returns

Southern BancShares NC  vs.  Citizens Financial Corp

Southern BancShares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern BancShares and Citizens Financial

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

The idea behind Southern BancShares NC and Citizens Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.