Correlation Between Citigroup and Provident Financial
Can any of the company-specific risk be diversified away by investing in both Citigroup and Provident 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 Citigroup and Provident Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Provident Financial Services, you can compare the effects of market volatilities on Citigroup and Provident 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 Citigroup with a short position of Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Provident Financial.
Diversification Opportunities for Citigroup and Provident Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Provident is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial and Citigroup 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 Citigroup are associated (or correlated) with Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Citigroup i.e., Citigroup and Provident Financial go up and down completely randomly.
Pair Corralation between Citigroup and Provident Financial
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.24 times less return on investment than Provident Financial. But when comparing it to its historical volatility, Citigroup is 1.71 times less risky than Provident Financial. It trades about 0.25 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,910 in Provident Financial Services on August 28, 2024 and sell it today you would earn a total of 256.00 from holding Provident Financial Services or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Provident Financial Services
Performance |
| Timeline |
| Citigroup |
| Provident Financial |
Citigroup and Provident Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Provident Financial
The main advantage of trading using opposite Citigroup and Provident Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Provident 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 Provident Financial will offset losses from the drop in Provident Financial's long position.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
| Provident Financial vs. First Mid Illinois | Provident Financial vs. ConnectOne Bancorp | Provident Financial vs. Finward Bancorp | Provident Financial vs. CrossFirst Bankshares |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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