Correlation Between Citizens Financial and Cadence Bank

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

Diversification Opportunities for Citizens Financial and Cadence Bank

0.56

Correlation Coefficient

Citizens Financial  Cadence Bank

Very weak diversification

The 3 months correlation between Citizens and Cadence is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Cadence Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bank 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 Cadence Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bank has no effect on the direction of Citizens Financial i.e., Citizens Financial and Cadence Bank go up and down completely randomly.

Pair Corralation between Citizens Financial and Cadence Bank

Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the Cadence Bank. In addition to that, Citizens Financial is 1.26 times more volatile than Cadence Bank. It trades about -0.04 of its total potential returns per unit of risk. Cadence Bank is currently generating about 0.07 per unit of volatility. If you would invest  2,071  in Cadence Bank on November 29, 2024 and sell it today you would earn a total of  81.00  from holding Cadence Bank or generate 3.91% return on investment over 90 days.

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

Citizens Financial Group  vs.  Cadence Bank

Citizens Financial

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. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cadence Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cadence Bank 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 Cadence Bank

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

The idea behind Citizens Financial Group and Cadence Bank 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.