Correlation Between Citizens Financial and IF Bancorp

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Can any of the company-specific risk be diversified away by investing in both Citizens Financial and IF 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 Citizens Financial and IF Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citizens Financial Services and IF Bancorp, you can compare the effects of market volatilities on Citizens Financial and IF 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 Citizens Financial with a short position of IF Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and IF Bancorp.

Diversification Opportunities for Citizens Financial and IF Bancorp

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Citizens and IROQ is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Services and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp 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 Services are associated (or correlated) with IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and IF Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and IF Bancorp

Given the investment horizon of 90 days Citizens Financial Services is expected to generate 1.6 times more return on investment than IF Bancorp. However, Citizens Financial is 1.6 times more volatile than IF Bancorp. It trades about 0.18 of its potential returns per unit of risk. IF Bancorp is currently generating about 0.05 per unit of risk. If you would invest  6,025  in Citizens Financial Services on August 31, 2024 and sell it today you would earn a total of  1,036  from holding Citizens Financial Services or generate 17.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Citizens Financial Services  vs.  IF Bancorp

 Performance 
       Timeline  
Citizens Financial 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Citizens Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
IF Bancorp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial and IF Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citizens Financial and IF Bancorp

The main advantage of trading using opposite Citizens Financial and IF Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, IF 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 IF Bancorp will offset losses from the drop in IF Bancorp's long position.
The idea behind Citizens Financial Services and IF Bancorp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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