Correlation Between Truist Financial and Citizens Northern

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

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

Diversification Opportunities for Truist Financial and Citizens Northern

-0.48

Correlation Coefficient

Truist Financial  Citizens Northern

Very good diversification

The 3 months correlation between Truist and Citizens is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial 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 Truist Financial 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 Truist Financial 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 Truist Financial i.e., Truist Financial and Citizens Northern go up and down completely randomly.

Pair Corralation between Truist Financial and Citizens Northern

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Citizens Northern. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 1.5 times less risky than Citizens Northern. The preferred stock trades about -0.23 of its potential returns per unit of risk. The Citizens Northern Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,052  in Citizens Northern Corp on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Citizens Northern Corp or generate 0.88% return on investment over 90 days.

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

Truist Financial  vs.  Citizens Northern Corp

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Citizens Northern Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Northern Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Citizens Northern may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Truist Financial and Citizens Northern

The main advantage of trading using opposite Truist Financial and Citizens Northern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial 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 Truist Financial 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.