Correlation Between Citizens Financial and CF Bankshares

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

Diversification Opportunities for Citizens Financial and CF Bankshares

0.56

Correlation Coefficient

Citizens Financial  CF Bankshares

Very weak diversification

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

Pair Corralation between Citizens Financial and CF Bankshares

Assuming the 90 days trading horizon Citizens Financial is expected to generate 6.13 times less return on investment than CF Bankshares. But when comparing it to its historical volatility, Citizens Financial Group, is 5.63 times less risky than CF Bankshares. It trades about 0.14 of its potential returns per unit of risk. CF Bankshares is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,228  in CF Bankshares on September 12, 2024 and sell it today you would earn a total of  549.00  from holding CF Bankshares or generate 24.64% 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.  CF Bankshares

Citizens Financial Group,

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

CF Bankshares

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and CF Bankshares

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

The idea behind Citizens Financial Group, and CF Bankshares 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..