Correlation Between Citigroup and Citizens Financial

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

By analyzing existing cross correlation between Citigroup and Citizens Financial Group, you can compare the effects of market volatilities on Citigroup and Citizens Financial 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 Citigroup with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Citizens Financial.

Diversification Opportunities for Citigroup and Citizens Financial

0.92

Correlation Coefficient

Citigroup  Citizens Financial

Almost no diversification

The 3 months correlation between Citigroup and Citizens is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Citigroup 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 Citigroup are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Citigroup i.e., Citigroup and Citizens Financial go up and down completely randomly.

Pair Corralation between Citigroup and Citizens Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.81 times less return on investment than Citizens Financial. In addition to that, Citigroup is 1.02 times more volatile than Citizens Financial Group. It trades about 0.05 of its total potential returns per unit of risk. Citizens Financial Group is currently generating about 0.1 per unit of volatility. If you would invest  3,128  in Citizens Financial Group on September 20, 2024 and sell it today you would earn a total of  1,041  from holding Citizens Financial Group or generate 33.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.43%
Values	Daily Returns

Citigroup  vs.  Citizens Financial Group

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citizens Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 9 (%) 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.

Pair Trading with Citigroup and Citizens Financial

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

The idea behind Citigroup and Citizens Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.