Correlation Between Citizens Financial and Lennar

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

Diversification Opportunities for Citizens Financial and Lennar

0.22

Correlation Coefficient

Citizens Financial  Lennar

Modest diversification

The 3 months correlation between Citizens and Lennar is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Citizens Financial i.e., Citizens Financial and Lennar go up and down completely randomly.

Pair Corralation between Citizens Financial and Lennar

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.86 times more return on investment than Lennar. However, Citizens Financial Group, is 1.16 times less risky than Lennar. It trades about -0.11 of its potential returns per unit of risk. Lennar is currently generating about -0.37 per unit of risk. If you would invest  28,221  in Citizens Financial Group, on October 6, 2024 and sell it today you would lose (1,250) from holding Citizens Financial Group, or give up 4.43% 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 Group,  vs.  Lennar

Citizens Financial Group,

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 somewhat weak technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citizens Financial and Lennar

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

The idea behind Citizens Financial Group, and Lennar 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.