Correlation Between Citizens Financial and Tripadvisor

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

Diversification Opportunities for Citizens Financial and Tripadvisor

0.78

Correlation Coefficient

Citizens Financial  Tripadvisor

Poor diversification

The 3 months correlation between Citizens and Tripadvisor is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Tripadvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tripadvisor 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 Tripadvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tripadvisor has no effect on the direction of Citizens Financial i.e., Citizens Financial and Tripadvisor go up and down completely randomly.

Pair Corralation between Citizens Financial and Tripadvisor

Assuming the 90 days trading horizon Citizens Financial Group, is expected to under-perform the Tripadvisor. But the stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group, is 2.24 times less risky than Tripadvisor. The stock trades about -0.11 of its potential returns per unit of risk. The Tripadvisor is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,541  in Tripadvisor on December 27, 2024 and sell it today you would lose (469.00) from holding Tripadvisor or give up 5.49% of portfolio value over 90 days.

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

Citizens Financial Group,  vs.  Tripadvisor

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.

Tripadvisor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tripadvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tripadvisor 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 Tripadvisor

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

The idea behind Citizens Financial Group, and Tripadvisor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.