Correlation Between CFG BANK and SALAFIN

Can any of the company-specific risk be diversified away by investing in both CFG BANK and SALAFIN 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 CFG BANK and SALAFIN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CFG BANK and SALAFIN, you can compare the effects of market volatilities on CFG BANK and SALAFIN 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 CFG BANK with a short position of SALAFIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of CFG BANK and SALAFIN.

Diversification Opportunities for CFG BANK and SALAFIN

-0.64

Correlation Coefficient

CFG BANK  SALAFIN

Excellent diversification

The 3 months correlation between CFG and SALAFIN is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding CFG BANK and SALAFIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALAFIN and CFG BANK 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 CFG BANK are associated (or correlated) with SALAFIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALAFIN has no effect on the direction of CFG BANK i.e., CFG BANK and SALAFIN go up and down completely randomly.

Pair Corralation between CFG BANK and SALAFIN

Assuming the 90 days trading horizon CFG BANK is expected to generate 0.48 times more return on investment than SALAFIN. However, CFG BANK is 2.09 times less risky than SALAFIN. It trades about 0.45 of its potential returns per unit of risk. SALAFIN is currently generating about -0.09 per unit of risk. If you would invest  20,800  in CFG BANK on October 10, 2024 and sell it today you would earn a total of  2,420  from holding CFG BANK or generate 11.63% return on investment over 90 days.

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

CFG BANK  vs.  SALAFIN

CFG BANK

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CFG BANK are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, CFG BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

SALAFIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SALAFIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SALAFIN is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CFG BANK and SALAFIN

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

The idea behind CFG BANK and SALAFIN 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.