Correlation Between Citizens Financial and CARSALESCOM

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

Diversification Opportunities for Citizens Financial and CARSALESCOM

0.74

Correlation Coefficient

Citizens Financial  CARSALESCOM

Poor diversification

The 3 months correlation between Citizens and CARSALESCOM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Citizens Financial i.e., Citizens Financial and CARSALESCOM go up and down completely randomly.

Pair Corralation between Citizens Financial and CARSALESCOM

Assuming the 90 days horizon Citizens Financial Group is expected to generate 1.09 times more return on investment than CARSALESCOM. However, Citizens Financial is 1.09 times more volatile than CARSALESCOM. It trades about 0.12 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.03 per unit of risk. If you would invest  3,099  in Citizens Financial Group on September 28, 2024 and sell it today you would earn a total of  1,083  from holding Citizens Financial Group or generate 34.95% return on investment over 90 days.

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

Citizens Financial Group  vs.  CARSALESCOM

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 unsteady basic indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citizens Financial and CARSALESCOM

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

The idea behind Citizens Financial Group and CARSALESCOM 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.