Correlation Between Citizens Financial and Western Alliance

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

Diversification Opportunities for Citizens Financial and Western Alliance

0.93

Correlation Coefficient

Citizens Financial  Western Alliance

Almost no diversification

The 3 months correlation between Citizens and Western is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Citizens Financial i.e., Citizens Financial and Western Alliance go up and down completely randomly.

Pair Corralation between Citizens Financial and Western Alliance

Considering the 90-day investment horizon Citizens Financial Group, is expected to generate 0.67 times more return on investment than Western Alliance. However, Citizens Financial Group, is 1.48 times less risky than Western Alliance. It trades about -0.06 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about -0.05 per unit of risk. If you would invest  4,318  in Citizens Financial Group, on December 29, 2024 and sell it today you would lose (293.00) from holding Citizens Financial Group, or give up 6.79% of portfolio value over 90 days.

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

Citizens Financial Group,  vs.  Western Alliance 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 latest unsteady 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.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Citizens Financial and Western Alliance

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

The idea behind Citizens Financial Group, and Western Alliance Bancorporation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.