Correlation Between Western New and Citizens Financial

Can any of the company-specific risk be diversified away by investing in both Western New 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 New 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 New England and Citizens Financial Group, you can compare the effects of market volatilities on Western New 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 New with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western New and Citizens Financial.

Diversification Opportunities for Western New and Citizens Financial

0.44

Correlation Coefficient

Western New  Citizens Financial

Very weak diversification

The 3 months correlation between Western and Citizens is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Western New 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 New England 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 Western New i.e., Western New and Citizens Financial go up and down completely randomly.

Pair Corralation between Western New and Citizens Financial

Given the investment horizon of 90 days Western New is expected to generate 1.99 times less return on investment than Citizens Financial. In addition to that, Western New is 1.15 times more volatile than Citizens Financial Group. It trades about 0.03 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  1,871  in Citizens Financial Group on December 30, 2024 and sell it today you would earn a total of  81.00  from holding Citizens Financial Group or generate 4.33% return on investment over 90 days.

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

Western New England  vs.  Citizens Financial Group

Western New England

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Western New is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Citizens Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western New and Citizens Financial

The main advantage of trading using opposite Western New and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western New 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 New England 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.