Correlation Between Diageo PLC and Citizens Financial

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

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

Diversification Opportunities for Diageo PLC and Citizens Financial

-0.35

Correlation Coefficient

Diageo PLC  Citizens Financial

Very good diversification

The 3 months correlation between Diageo and Citizens is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, and Diageo PLC 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 Diageo PLC ADR 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 Group, has no effect on the direction of Diageo PLC i.e., Diageo PLC and Citizens Financial go up and down completely randomly.

Pair Corralation between Diageo PLC and Citizens Financial

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Citizens Financial. In addition to that, Diageo PLC is 2.79 times more volatile than Citizens Financial Group,. It trades about -0.14 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.04 per unit of volatility. If you would invest  2,581  in Citizens Financial Group, on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Citizens Financial Group, or generate 1.43% return on investment over 90 days.

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

Diageo PLC ADR  vs.  Citizens Financial Group,

Diageo PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Citizens Financial Group,

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Diageo PLC and Citizens Financial

The main advantage of trading using opposite Diageo PLC and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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 Diageo PLC ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.