Correlation Between Citizens Financial and Liberty Broadband

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

Diversification Opportunities for Citizens Financial and Liberty Broadband

0.27

Correlation Coefficient

Citizens Financial  Liberty Broadband

Modest diversification

The 3 months correlation between Citizens and Liberty is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of Citizens Financial i.e., Citizens Financial and Liberty Broadband go up and down completely randomly.

Pair Corralation between Citizens Financial and Liberty Broadband

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.9 times more return on investment than Liberty Broadband. However, Citizens Financial Group, is 1.11 times less risky than Liberty Broadband. It trades about 0.16 of its potential returns per unit of risk. Liberty Broadband is currently generating about 0.02 per unit of risk. If you would invest  23,455  in Citizens Financial Group, on October 23, 2024 and sell it today you would earn a total of  5,525  from holding Citizens Financial Group, or generate 23.56% return on investment over 90 days.

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

Citizens Financial Group,  vs.  Liberty Broadband

Citizens Financial Group,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 12 (%) 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.

Liberty Broadband

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Liberty Broadband 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 Liberty Broadband

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

The idea behind Citizens Financial Group, and Liberty Broadband 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.