Correlation Between Citizens Financial and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Potomac Bancshares 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 Citizens Financial and Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citizens Financial Corp and Potomac Bancshares, you can compare the effects of market volatilities on Citizens Financial and Potomac Bancshares 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 Citizens Financial with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Potomac Bancshares.
Diversification Opportunities for Citizens Financial and Potomac Bancshares
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citizens and Potomac is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and Citizens 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 Citizens Financial Corp are associated (or correlated) with Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of Citizens Financial i.e., Citizens Financial and Potomac Bancshares go up and down completely randomly.
Pair Corralation between Citizens Financial and Potomac Bancshares
Given the investment horizon of 90 days Citizens Financial is expected to generate 1.55 times less return on investment than Potomac Bancshares. But when comparing it to its historical volatility, Citizens Financial Corp is 1.83 times less risky than Potomac Bancshares. It trades about 0.31 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,413 in Potomac Bancshares on September 1, 2024 and sell it today you would earn a total of 237.00 from holding Potomac Bancshares or generate 16.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Corp vs. Potomac Bancshares
Performance |
| Timeline |
| Citizens Financial Corp |
| Potomac Bancshares |
Citizens Financial and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and Potomac Bancshares
The main advantage of trading using opposite Citizens Financial and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, Potomac Bancshares 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.| Citizens Financial vs. Century Next Financial | Citizens Financial vs. Triad Business Bank | Citizens Financial vs. First Ottawa Bancshares | Citizens Financial vs. First Community Financial |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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