Correlation Between Western Alliance and Citizens Financial

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

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

Diversification Opportunities for Western Alliance and Citizens Financial

0.93

Correlation Coefficient

Western Alliance  Citizens Financial

Almost no diversification

The 3 months correlation between Western and Citizens is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. 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 Western Alliance 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 Western Alliance Bancorporation 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 Western Alliance i.e., Western Alliance and Citizens Financial go up and down completely randomly.

Pair Corralation between Western Alliance and Citizens Financial

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to under-perform the Citizens Financial. In addition to that, Western Alliance is 1.48 times more volatile than Citizens Financial Group,. It trades about -0.05 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about -0.06 per unit of volatility. If you would invest  4,318  in Citizens Financial Group, on December 29, 2024 and sell it today you would lose (293.00) from holding Citizens Financial Group, or give up 6.79% of portfolio value over 90 days.

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

Western Alliance Bancorp.  vs.  Citizens Financial Group,

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Citizens Financial Group,

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Western Alliance and Citizens Financial

The main advantage of trading using opposite Western Alliance and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance 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 Western Alliance Bancorporation 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.