Correlation Between Citizens Financial and Auburn National

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Auburn National 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 Auburn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citizens Financial Group and Auburn National Bancorporation, you can compare the effects of market volatilities on Citizens Financial and Auburn National 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 Auburn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Auburn National.

Diversification Opportunities for Citizens Financial and Auburn National

-0.48

Correlation Coefficient

Citizens Financial  Auburn National

Very good diversification

The 3 months correlation between Citizens and Auburn is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Auburn National Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auburn National Banc 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 Group are associated (or correlated) with Auburn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auburn National Banc has no effect on the direction of Citizens Financial i.e., Citizens Financial and Auburn National go up and down completely randomly.

Pair Corralation between Citizens Financial and Auburn National

Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the Auburn National. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 2.5 times less risky than Auburn National. The preferred stock trades about -0.15 of its potential returns per unit of risk. The Auburn National Bancorporation is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,982  in Auburn National Bancorporation on September 14, 2024 and sell it today you would earn a total of  318.00  from holding Auburn National Bancorporation or generate 16.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citizens Financial Group  vs.  Auburn National Bancorp.

Citizens Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Auburn National Banc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auburn National Bancorporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Auburn National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Auburn National

The main advantage of trading using opposite Citizens Financial and Auburn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, Auburn National 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 Auburn National will offset losses from the drop in Auburn National's long position.

The idea behind Citizens Financial Group and Auburn National Bancorporation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.