Correlation Between Citizens Financial and Phillips

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Phillips 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 Phillips 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 Phillips 66, you can compare the effects of market volatilities on Citizens Financial and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Phillips.

Diversification Opportunities for Citizens Financial and Phillips

-0.44

Correlation Coefficient

Citizens Financial  Phillips

Very good diversification

The 3 months correlation between Citizens and Phillips is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Citizens Financial i.e., Citizens Financial and Phillips go up and down completely randomly.

Pair Corralation between Citizens Financial and Phillips

Assuming the 90 days trading horizon Citizens Financial Group, is expected to under-perform the Phillips. But the stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group, is 1.12 times less risky than Phillips. The stock trades about -0.1 of its potential returns per unit of risk. The Phillips 66 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  34,068  in Phillips 66 on December 26, 2024 and sell it today you would earn a total of  2,582  from holding Phillips 66 or generate 7.58% return on investment over 90 days.

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

Citizens Financial Group,  vs.  Phillips 66

Citizens Financial Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Financial Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Phillips 66

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Phillips may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citizens Financial and Phillips

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

The idea behind Citizens Financial Group, and Phillips 66 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.