Correlation Between Citizens Financial and Simmons First

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

Diversification Opportunities for Citizens Financial and Simmons First

-0.77

Correlation Coefficient

Citizens Financial  Simmons First

Pay attention - limited upside

The 3 months correlation between Citizens and Simmons is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Citizens Financial i.e., Citizens Financial and Simmons First go up and down completely randomly.

Pair Corralation between Citizens Financial and Simmons First

Assuming the 90 days trading horizon Citizens Financial Group is expected to generate 1.48 times more return on investment than Simmons First. However, Citizens Financial is 1.48 times more volatile than Simmons First National. It trades about -0.11 of its potential returns per unit of risk. Simmons First National is currently generating about -0.19 per unit of risk. If you would invest  2,128  in Citizens Financial Group on September 13, 2024 and sell it today you would lose (58.00) from holding Citizens Financial Group or give up 2.73% of portfolio value over 90 days.

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

Citizens Financial Group  vs.  Simmons First National

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 latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Simmons First National

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simmons First National are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Simmons First exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Simmons First

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

The idea behind Citizens Financial Group and Simmons First National 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.