Correlation Between First Mid and Citizens Northern
Can any of the company-specific risk be diversified away by investing in both First Mid 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 First Mid and Citizens Northern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Mid Illinois and Citizens Northern Corp, you can compare the effects of market volatilities on First Mid 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 First Mid with a short position of Citizens Northern. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Mid and Citizens Northern.
Diversification Opportunities for First Mid and Citizens Northern
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Citizens is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois 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 First Mid 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 First Mid Illinois 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 First Mid i.e., First Mid and Citizens Northern go up and down completely randomly.
Pair Corralation between First Mid and Citizens Northern
Given the investment horizon of 90 days First Mid is expected to generate 4.25 times less return on investment than Citizens Northern. But when comparing it to its historical volatility, First Mid Illinois is 1.65 times less risky than Citizens Northern. It trades about 0.1 of its potential returns per unit of risk. Citizens Northern Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,860 in Citizens Northern Corp on November 1, 2024 and sell it today you would earn a total of 281.00 from holding Citizens Northern Corp or generate 15.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Mid Illinois vs. Citizens Northern Corp
Performance |
| Timeline |
| First Mid Illinois |
| Citizens Northern Corp |
First Mid and Citizens Northern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Mid and Citizens Northern
The main advantage of trading using opposite First Mid and Citizens Northern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Mid 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.| First Mid vs. Finward Bancorp | First Mid vs. Great Southern Bancorp | First Mid vs. Franklin Financial Services | First Mid vs. Community West Bancshares |
| Citizens Northern vs. Penns Woods Bancorp | Citizens Northern vs. Chemung Financial Corp | Citizens Northern vs. Enterprise 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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