Correlation Between Citizens Financial and Capital Bancorp

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

Diversification Opportunities for Citizens Financial and Capital Bancorp

-0.69

Correlation Coefficient

Citizens Financial  Capital Bancorp

Excellent diversification

The 3 months correlation between Citizens and Capital is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp 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 Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and Capital Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and Capital Bancorp

Assuming the 90 days trading horizon Citizens Financial is expected to generate 4.85 times less return on investment than Capital Bancorp. But when comparing it to its historical volatility, Citizens Financial Group is 1.02 times less risky than Capital Bancorp. It trades about 0.01 of its potential returns per unit of risk. Capital Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,229  in Capital Bancorp on October 12, 2024 and sell it today you would earn a total of  447.00  from holding Capital Bancorp or generate 20.05% return on investment over 90 days.

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

Citizens Financial Group  vs.  Capital Bancorp

Citizens Financial

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Preferred Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Capital Bancorp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citizens Financial and Capital Bancorp

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

The idea behind Citizens Financial Group and Capital Bancorp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.