Correlation Between Alphabet and Citizens Financial

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

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

Diversification Opportunities for Alphabet and Citizens Financial

0.61

Correlation Coefficient

Alphabet  Citizens Financial

Poor diversification

The 3 months correlation between Alphabet and Citizens is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet 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 Alphabet 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 Alphabet 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 Alphabet i.e., Alphabet and Citizens Financial go up and down completely randomly.

Pair Corralation between Alphabet and Citizens Financial

Assuming the 90 days trading horizon Alphabet is expected to under-perform the Citizens Financial. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet is 1.1 times less risky than Citizens Financial. The stock trades about -0.04 of its potential returns per unit of risk. The Citizens Financial Group, is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  26,884  in Citizens Financial Group, on October 23, 2024 and sell it today you would earn a total of  2,096  from holding Citizens Financial Group, or generate 7.8% return on investment over 90 days.

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

Alphabet  vs.  Citizens Financial Group,

Alphabet

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alphabet sustained solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial Group,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Citizens Financial

The main advantage of trading using opposite Alphabet and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.