Correlation Between Citizens Financial and TAL Education

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

Diversification Opportunities for Citizens Financial and TAL Education

-0.54

Correlation Coefficient

Citizens Financial  TAL Education

Excellent diversification

The 3 months correlation between Citizens and TAL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Citizens Financial i.e., Citizens Financial and TAL Education go up and down completely randomly.

Pair Corralation between Citizens Financial and TAL Education

Assuming the 90 days horizon Citizens Financial Group is expected to generate 0.66 times more return on investment than TAL Education. However, Citizens Financial Group is 1.51 times less risky than TAL Education. It trades about -0.13 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.26 per unit of risk. If you would invest  4,432  in Citizens Financial Group on October 10, 2024 and sell it today you would lose (153.00) from holding Citizens Financial Group or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Citizens Financial Group  vs.  TAL Education Group

Citizens Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Citizens Financial and TAL Education

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

The idea behind Citizens Financial Group and TAL Education Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.