Correlation Between Citizens Financial and Bank of Botetourt

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

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

Diversification Opportunities for Citizens Financial and Bank of Botetourt

0.56

Correlation Coefficient

Citizens Financial  Bank of Botetourt

Very weak diversification

The 3 months correlation between Citizens and Bank is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt 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 Corp are associated (or correlated) with Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of Citizens Financial i.e., Citizens Financial and Bank of Botetourt go up and down completely randomly.

Pair Corralation between Citizens Financial and Bank of Botetourt

Given the investment horizon of 90 days Citizens Financial Corp is expected to under-perform the Bank of Botetourt. But the pink sheet apears to be less risky and, when comparing its historical volatility, Citizens Financial Corp is 1.1 times less risky than Bank of Botetourt. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Bank of Botetourt is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,216  in Bank of Botetourt on October 1, 2024 and sell it today you would earn a total of  9.00  from holding Bank of Botetourt or generate 0.28% return on investment over 90 days.

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

Citizens Financial Corp  vs.  Bank of Botetourt

Citizens Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Bank of Botetourt

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citizens Financial and Bank of Botetourt

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

The idea behind Citizens Financial Corp and Bank of Botetourt 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.

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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 Valuation module to check real value of public entities based on technical and fundamental data.