Correlation Between Citizens Financial and Western Alliance

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

Diversification Opportunities for Citizens Financial and Western Alliance

0.76

Correlation Coefficient

Citizens Financial  Western Alliance

Poor diversification

The 3 months correlation between Citizens and Western is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Citizens Financial i.e., Citizens Financial and Western Alliance go up and down completely randomly.

Pair Corralation between Citizens Financial and Western Alliance

Assuming the 90 days trading horizon Citizens Financial Group is expected to generate 1.76 times more return on investment than Western Alliance. However, Citizens Financial is 1.76 times more volatile than Western Alliance Bancorporation. It trades about 0.09 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.05 per unit of risk. If you would invest  1,903  in Citizens Financial Group on December 24, 2024 and sell it today you would earn a total of  124.00  from holding Citizens Financial Group or generate 6.52% return on investment over 90 days.

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

Citizens Financial Group  vs.  Western Alliance Bancorp.

Citizens Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Citizens Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Alliance Ban

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Western Alliance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citizens Financial and Western Alliance

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

The idea behind Citizens Financial Group and Western Alliance Bancorporation 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.