Correlation Between Lennar and Citizens Financial

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

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

Diversification Opportunities for Lennar and Citizens Financial

0.12

Correlation Coefficient

Lennar  Citizens Financial

Average diversification

The 3 months correlation between Lennar and Citizens is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lennar 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 Lennar 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 Lennar 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 Lennar i.e., Lennar and Citizens Financial go up and down completely randomly.

Pair Corralation between Lennar and Citizens Financial

Assuming the 90 days trading horizon Lennar is expected to generate 0.79 times more return on investment than Citizens Financial. However, Lennar is 1.27 times less risky than Citizens Financial. It trades about 0.07 of its potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.04 per unit of risk. If you would invest  51,918  in Lennar on October 23, 2024 and sell it today you would earn a total of  32,998  from holding Lennar or generate 63.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.55%
Values	Daily Returns

Lennar  vs.  Citizens Financial Group,

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Lennar and Citizens Financial

The main advantage of trading using opposite Lennar and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar 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 Lennar 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.