Correlation Between Citizens Financial and Netflix

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

Diversification Opportunities for Citizens Financial and Netflix

0.58

Correlation Coefficient

Citizens Financial  Netflix

Very weak diversification

The 3 months correlation between Citizens and Netflix is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Citizens Financial i.e., Citizens Financial and Netflix go up and down completely randomly.

Pair Corralation between Citizens Financial and Netflix

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 1.66 times more return on investment than Netflix. However, Citizens Financial is 1.66 times more volatile than Netflix. It trades about -0.07 of its potential returns per unit of risk. Netflix is currently generating about -0.17 per unit of risk. If you would invest  28,417  in Citizens Financial Group, on October 10, 2024 and sell it today you would lose (877.00) from holding Citizens Financial Group, or give up 3.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Citizens Financial Group,  vs.  Netflix

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

Netflix

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Netflix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Netflix

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

The idea behind Citizens Financial Group, and Netflix 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.