Correlation Between Citizens Financial and First Bank

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

Diversification Opportunities for Citizens Financial and First Bank

-0.37

Correlation Coefficient

Citizens Financial  First Bank

Very good diversification

The 3 months correlation between Citizens and First is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and First Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bank 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 First Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bank has no effect on the direction of Citizens Financial i.e., Citizens Financial and First Bank go up and down completely randomly.

Pair Corralation between Citizens Financial and First Bank

Assuming the 90 days trading horizon Citizens Financial is expected to generate 1.83 times less return on investment than First Bank. But when comparing it to its historical volatility, Citizens Financial Group, is 3.96 times less risky than First Bank. It trades about 0.14 of its potential returns per unit of risk. First Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,233  in First Bank on September 18, 2024 and sell it today you would earn a total of  229.00  from holding First Bank or generate 18.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.55%
Values	Daily Returns

Citizens Financial Group,  vs.  First Bank

Citizens Financial Group,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 8 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

First Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, First Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citizens Financial and First Bank

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

The idea behind Citizens Financial Group, and First Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.