Correlation Between CullenFrost Bankers and Citizens Financial

Can any of the company-specific risk be diversified away by investing in both CullenFrost Bankers and Citizens Financial 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 CullenFrost Bankers and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CullenFrost Bankers and Citizens Financial Group, you can compare the effects of market volatilities on CullenFrost Bankers and Citizens Financial 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 CullenFrost Bankers with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CullenFrost Bankers and Citizens Financial.

Diversification Opportunities for CullenFrost Bankers and Citizens Financial

0.84

Correlation Coefficient

CullenFrost Bankers  Citizens Financial

Very poor diversification

The 3 months correlation between CullenFrost and Citizens is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and CullenFrost Bankers 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 CullenFrost Bankers are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of CullenFrost Bankers i.e., CullenFrost Bankers and Citizens Financial go up and down completely randomly.

Pair Corralation between CullenFrost Bankers and Citizens Financial

Assuming the 90 days trading horizon CullenFrost Bankers is expected to under-perform the Citizens Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, CullenFrost Bankers is 1.46 times less risky than Citizens Financial. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Citizens Financial Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,105  in Citizens Financial Group on November 29, 2024 and sell it today you would lose (75.00) from holding Citizens Financial Group or give up 3.56% of portfolio value over 90 days.

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

CullenFrost Bankers  vs.  Citizens Financial Group

CullenFrost Bankers

Risk-Adjusted Performance

Very Weak

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

Citizens Financial

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. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CullenFrost Bankers and Citizens Financial

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

The idea behind CullenFrost Bankers and Citizens Financial Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.