Correlation Between Citizens Financial and US Bancorp

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

Diversification Opportunities for Citizens Financial and US Bancorp

0.77

Correlation Coefficient

Citizens Financial  US Bancorp

Poor diversification

The 3 months correlation between Citizens and USB is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and US Bancorp go up and down completely randomly.

Pair Corralation between Citizens Financial and US Bancorp

Considering the 90-day investment horizon Citizens Financial Group, is expected to generate 1.0 times more return on investment than US Bancorp. However, Citizens Financial Group, is 1.0 times less risky than US Bancorp. It trades about -0.04 of its potential returns per unit of risk. US Bancorp is currently generating about -0.09 per unit of risk. If you would invest  4,318  in Citizens Financial Group, on December 28, 2024 and sell it today you would lose (193.00) from holding Citizens Financial Group, or give up 4.47% of portfolio value over 90 days.

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

Citizens Financial Group,  vs.  US Bancorp

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 nearly stable technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

US Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citizens Financial and US Bancorp

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

The idea behind Citizens Financial Group, and US Bancorp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.