Correlation Between Citizens Financial and Adobe

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

Diversification Opportunities for Citizens Financial and Adobe

0.24

Correlation Coefficient

Citizens Financial  Adobe

Modest diversification

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

Pair Corralation between Citizens Financial and Adobe

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.91 times more return on investment than Adobe. However, Citizens Financial Group, is 1.09 times less risky than Adobe. It trades about 0.12 of its potential returns per unit of risk. Adobe Inc is currently generating about -0.02 per unit of risk. If you would invest  16,088  in Citizens Financial Group, on October 24, 2024 and sell it today you would earn a total of  12,892  from holding Citizens Financial Group, or generate 80.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

Citizens Financial Group,  vs.  Adobe Inc

Citizens Financial Group,

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Adobe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citizens Financial and Adobe

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

The idea behind Citizens Financial Group, and Adobe Inc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.