Correlation Between Dime Community and Citizens Financial

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

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

Diversification Opportunities for Dime Community and Citizens Financial

0.8

Correlation Coefficient

Dime Community  Citizens Financial

Very poor diversification

The 3 months correlation between Dime and Citizens is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Dime Community 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 Dime Community Bancshares 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 Dime Community i.e., Dime Community and Citizens Financial go up and down completely randomly.

Pair Corralation between Dime Community and Citizens Financial

Assuming the 90 days horizon Dime Community Bancshares is expected to generate 1.12 times more return on investment than Citizens Financial. However, Dime Community is 1.12 times more volatile than Citizens Financial Group. It trades about 0.13 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.03 per unit of risk. If you would invest  1,639  in Dime Community Bancshares on September 23, 2024 and sell it today you would earn a total of  323.00  from holding Dime Community Bancshares or generate 19.71% return on investment over 90 days.

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

Dime Community Bancshares  vs.  Citizens Financial Group

Dime Community Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Citizens Financial

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Dime Community and Citizens Financial

The main advantage of trading using opposite Dime Community and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dime Community 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 Dime Community Bancshares 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.