Correlation Between Potomac Bancshares and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Potomac Bancshares 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 Potomac Bancshares and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potomac Bancshares and Citizens Financial Corp, you can compare the effects of market volatilities on Potomac Bancshares 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 Potomac Bancshares with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potomac Bancshares and Citizens Financial.
Diversification Opportunities for Potomac Bancshares and Citizens Financial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Potomac and Citizens is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Potomac Bancshares and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp and Potomac Bancshares 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 Potomac Bancshares 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 Corp has no effect on the direction of Potomac Bancshares i.e., Potomac Bancshares and Citizens Financial go up and down completely randomly.
Pair Corralation between Potomac Bancshares and Citizens Financial
Given the investment horizon of 90 days Potomac Bancshares is expected to generate 1.83 times more return on investment than Citizens Financial. However, Potomac Bancshares is 1.83 times more volatile than Citizens Financial Corp. It trades about 0.26 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.31 per unit of risk. 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 |
Potomac Bancshares vs. Citizens Financial Corp
Performance |
| Timeline |
| Potomac Bancshares |
| Citizens Financial Corp |
Potomac Bancshares and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potomac Bancshares and Citizens Financial
The main advantage of trading using opposite Potomac Bancshares and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potomac Bancshares 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.| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
| Citizens Financial vs. Century Next Financial | Citizens Financial vs. Triad Business Bank | Citizens Financial vs. First Ottawa Bancshares | Citizens Financial vs. First Community Financial |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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