Correlation Between Citizens Financial and Princeton Capital

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

Diversification Opportunities for Citizens Financial and Princeton Capital

0.24

Correlation Coefficient

Citizens Financial  Princeton Capital

Modest diversification

The 3 months correlation between Citizens and Princeton is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Princeton Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Capital 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 Princeton Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Capital has no effect on the direction of Citizens Financial i.e., Citizens Financial and Princeton Capital go up and down completely randomly.

Pair Corralation between Citizens Financial and Princeton Capital

Given the investment horizon of 90 days Citizens Financial Corp is expected to generate 0.15 times more return on investment than Princeton Capital. However, Citizens Financial Corp is 6.54 times less risky than Princeton Capital. It trades about -0.26 of its potential returns per unit of risk. Princeton Capital is currently generating about -0.22 per unit of risk. If you would invest  2,600  in Citizens Financial Corp on September 27, 2024 and sell it today you would lose (175.00) from holding Citizens Financial Corp or give up 6.73% of portfolio value over 90 days.

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

Citizens Financial Corp  vs.  Princeton Capital

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.

Princeton Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Princeton Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Princeton Capital

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

The idea behind Citizens Financial Corp and Princeton Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.