Correlation Between Two Harbors and Citizens Financial

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

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

Diversification Opportunities for Two Harbors and Citizens Financial

0.0

Correlation Coefficient

Two Harbors  Citizens Financial

Pay attention - limited upside

The 3 months correlation between Two and Citizens is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments 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 Two Harbors 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 Two Harbors Investments 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 Two Harbors i.e., Two Harbors and Citizens Financial go up and down completely randomly.

Pair Corralation between Two Harbors and Citizens Financial

Assuming the 90 days trading horizon Two Harbors is expected to generate 1.65 times less return on investment than Citizens Financial. In addition to that, Two Harbors is 1.82 times more volatile than Citizens Financial Group,. It trades about 0.04 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.11 per unit of volatility. If you would invest  2,412  in Citizens Financial Group, on October 23, 2024 and sell it today you would earn a total of  246.00  from holding Citizens Financial Group, or generate 10.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	34.28%
Values	Daily Returns

Two Harbors Investments  vs.  Citizens Financial Group,

Two Harbors Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Two Harbors is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Citizens Financial Group,

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. Despite fairly strong technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Two Harbors and Citizens Financial

The main advantage of trading using opposite Two Harbors and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors 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 Two Harbors Investments 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.