Correlation Between Citizens Financial and Horizon Bancorp

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Horizon 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 Horizon Bancorp 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 Horizon Bancorp, you can compare the effects of market volatilities on Citizens Financial and Horizon 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 Horizon Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Horizon Bancorp.

Diversification Opportunities for Citizens Financial and Horizon Bancorp

-0.67

Correlation Coefficient

Citizens Financial  Horizon Bancorp

Excellent diversification

The 3 months correlation between Citizens and Horizon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Horizon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon 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 Group are associated (or correlated) with Horizon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and Horizon Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and Horizon Bancorp

Assuming the 90 days trading horizon Citizens Financial is expected to generate 2.02 times less return on investment than Horizon Bancorp. But when comparing it to its historical volatility, Citizens Financial Group is 1.48 times less risky than Horizon Bancorp. It trades about 0.03 of its potential returns per unit of risk. Horizon Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,381  in Horizon Bancorp on August 31, 2024 and sell it today you would earn a total of  459.00  from holding Horizon Bancorp or generate 33.24% return on investment over 90 days.

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

Citizens Financial Group  vs.  Horizon 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 rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Horizon Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Horizon Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Horizon Bancorp

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

The idea behind Citizens Financial Group and Horizon 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.