Correlation Between Ford and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Citizens Financial Services, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Citizens Financial.
Diversification Opportunities for Ford and Citizens Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Citizens is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Citizens Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Ford 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 Ford Motor 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 has no effect on the direction of Ford i.e., Ford and Citizens Financial go up and down completely randomly.
Pair Corralation between Ford and Citizens Financial
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Citizens Financial. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.39 times less risky than Citizens Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Citizens Financial Services is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 7,915 in Citizens Financial Services on November 2, 2024 and sell it today you would lose (1,648) from holding Citizens Financial Services or give up 20.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Citizens Financial Services
Performance |
| Timeline |
| Ford Motor |
| Citizens Financial |
Ford and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Citizens Financial
The main advantage of trading using opposite Ford and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Citizens Financial Services 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.| Citizens Financial vs. Home Federal Bancorp | Citizens Financial vs. Community West Bancshares | Citizens Financial vs. Magyar Bancorp | Citizens Financial vs. Finward Bancorp |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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