Correlation Between First Horizon and Citizens Financial

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

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

Diversification Opportunities for First Horizon and Citizens Financial

0.37

Correlation Coefficient

First Horizon  Citizens Financial

Weak diversification

The 3 months correlation between First and Citizens is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and First Horizon 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 First Horizon 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 First Horizon i.e., First Horizon and Citizens Financial go up and down completely randomly.

Pair Corralation between First Horizon and Citizens Financial

Assuming the 90 days trading horizon First Horizon is expected to under-perform the Citizens Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, First Horizon is 1.18 times less risky than Citizens Financial. The preferred stock trades about 0.0 of its potential returns per unit of risk. The Citizens Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,947  in Citizens Financial Group on December 21, 2024 and sell it today you would earn a total of  112.00  from holding Citizens Financial Group or generate 5.75% return on investment over 90 days.

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

First Horizon  vs.  Citizens Financial Group

First Horizon

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Horizon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Horizon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Citizens Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Citizens Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Horizon and Citizens Financial

The main advantage of trading using opposite First Horizon and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon 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 First Horizon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.