Correlation Between Citizens Financial and Japan Post

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

Diversification Opportunities for Citizens Financial and Japan Post

0.59

Correlation Coefficient

Citizens Financial  Japan Post

Very weak diversification

The 3 months correlation between Citizens and Japan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Japan Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Holdings 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 Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Holdings has no effect on the direction of Citizens Financial i.e., Citizens Financial and Japan Post go up and down completely randomly.

Pair Corralation between Citizens Financial and Japan Post

Considering the 90-day investment horizon Citizens Financial is expected to generate 7.75 times less return on investment than Japan Post. But when comparing it to its historical volatility, Citizens Financial Group, is 3.23 times less risky than Japan Post. It trades about 0.09 of its potential returns per unit of risk. Japan Post Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  868.00  in Japan Post Holdings on September 12, 2024 and sell it today you would earn a total of  168.00  from holding Japan Post Holdings or generate 19.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	6.05%
Values	Daily Returns

Citizens Financial Group,  vs.  Japan Post Holdings

Citizens Financial Group,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Post Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Post Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Japan Post is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citizens Financial and Japan Post

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

The idea behind Citizens Financial Group, and Japan Post Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.