Correlation Between Citizens Financial and International Bancshares

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

Diversification Opportunities for Citizens Financial and International Bancshares

0.83

Correlation Coefficient

Citizens Financial  International Bancshares

Very poor diversification

The 3 months correlation between Citizens and International is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares 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 International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Citizens Financial i.e., Citizens Financial and International Bancshares go up and down completely randomly.

Pair Corralation between Citizens Financial and International Bancshares

Considering the 90-day investment horizon Citizens Financial Group, is expected to under-perform the International Bancshares. In addition to that, Citizens Financial is 1.11 times more volatile than International Bancshares. It trades about -0.06 of its total potential returns per unit of risk. International Bancshares is currently generating about 0.01 per unit of volatility. If you would invest  6,248  in International Bancshares on December 31, 2024 and sell it today you would earn a total of  24.00  from holding International Bancshares or generate 0.38% return on investment over 90 days.

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

Citizens Financial Group,  vs.  International Bancshares

Citizens Financial Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Financial Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

International Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, International Bancshares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citizens Financial and International Bancshares

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

The idea behind Citizens Financial Group, and International Bancshares 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.