Correlation Between Citizens Financial and Cemepe Investimentos

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

Diversification Opportunities for Citizens Financial and Cemepe Investimentos

0.72

Correlation Coefficient

Citizens Financial  Cemepe Investimentos

Poor diversification

The 3 months correlation between Citizens and Cemepe is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Cemepe Investimentos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemepe Investimentos 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 Cemepe Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemepe Investimentos has no effect on the direction of Citizens Financial i.e., Citizens Financial and Cemepe Investimentos go up and down completely randomly.

Pair Corralation between Citizens Financial and Cemepe Investimentos

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.27 times more return on investment than Cemepe Investimentos. However, Citizens Financial Group, is 3.76 times less risky than Cemepe Investimentos. It trades about 0.11 of its potential returns per unit of risk. Cemepe Investimentos SA is currently generating about -0.02 per unit of risk. If you would invest  15,964  in Citizens Financial Group, on October 9, 2024 and sell it today you would earn a total of  11,576  from holding Citizens Financial Group, or generate 72.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Citizens Financial Group,  vs.  Cemepe Investimentos SA

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.

Cemepe Investimentos

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cemepe Investimentos SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cemepe Investimentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Cemepe Investimentos

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

The idea behind Citizens Financial Group, and Cemepe Investimentos SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..