Correlation Between Citizens Financial and Tompkins Financial

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

Diversification Opportunities for Citizens Financial and Tompkins Financial

-0.8

Correlation Coefficient

Citizens Financial  Tompkins Financial

Pay attention - limited upside

The 3 months correlation between Citizens and Tompkins is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Tompkins Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tompkins Financial 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 Tompkins Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tompkins Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and Tompkins Financial go up and down completely randomly.

Pair Corralation between Citizens Financial and Tompkins Financial

Assuming the 90 days trading horizon Citizens Financial Group is expected to generate 0.73 times more return on investment than Tompkins Financial. However, Citizens Financial Group is 1.38 times less risky than Tompkins Financial. It trades about 0.02 of its potential returns per unit of risk. Tompkins Financial is currently generating about 0.01 per unit of risk. If you would invest  1,717  in Citizens Financial Group on September 24, 2024 and sell it today you would earn a total of  257.00  from holding Citizens Financial Group or generate 14.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Citizens Financial Group  vs.  Tompkins Financial

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tompkins Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Tompkins Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Tompkins Financial

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

The idea behind Citizens Financial Group and Tompkins Financial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.