Correlation Between Citizens Financial and CF Financial
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and CF 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 Citizens Financial and CF Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citizens Financial Group and CF Financial, you can compare the effects of market volatilities on Citizens Financial and CF 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 Citizens Financial with a short position of CF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and CF Financial.
Diversification Opportunities for Citizens Financial and CF Financial
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Citizens and CFFI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and Citizens Financial 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 Citizens Financial Group are associated (or correlated) with CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and CF Financial go up and down completely randomly.
Pair Corralation between Citizens Financial and CF Financial
Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the CF Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 1.92 times less risky than CF Financial. The preferred stock trades about -0.02 of its potential returns per unit of risk. The CF Financial is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 7,707 in CF Financial on December 6, 2024 and sell it today you would lose (197.00) from holding CF Financial or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Group vs. CF Financial
Performance |
| Timeline |
| Citizens Financial |
| CF Financial |
Citizens Financial and CF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and CF Financial
The main advantage of trading using opposite Citizens Financial and CF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, CF 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 CF Financial will offset losses from the drop in CF Financial's long position.| Citizens Financial vs. Capital One Financial | ||
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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