Correlation Between Citizens Financial and Unity Software

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

Diversification Opportunities for Citizens Financial and Unity Software

0.12

Correlation Coefficient

Citizens Financial  Unity Software

Average diversification

The 3 months correlation between Citizens and Unity is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software 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 Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Citizens Financial i.e., Citizens Financial and Unity Software go up and down completely randomly.

Pair Corralation between Citizens Financial and Unity Software

Assuming the 90 days trading horizon Citizens Financial Group, is expected to generate 0.27 times more return on investment than Unity Software. However, Citizens Financial Group, is 3.76 times less risky than Unity Software. It trades about -0.1 of its potential returns per unit of risk. Unity Software is currently generating about -0.04 per unit of risk. If you would invest  26,794  in Citizens Financial Group, on December 24, 2024 and sell it today you would lose (2,394) from holding Citizens Financial Group, or give up 8.93% of portfolio value over 90 days.

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

Citizens Financial Group,  vs.  Unity Software

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.

Unity Software

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Citizens Financial and Unity Software

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

The idea behind Citizens Financial Group, and Unity Software 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.