Correlation Between Citizens Financial and East West
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and East West 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 East West 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 East West Bancorp, you can compare the effects of market volatilities on Citizens Financial and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and East West.
Diversification Opportunities for Citizens Financial and East West
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citizens and East is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp 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 East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and East West go up and down completely randomly.
Pair Corralation between Citizens Financial and East West
Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the East West. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 3.12 times less risky than East West. The preferred stock trades about -0.29 of its potential returns per unit of risk. The East West Bancorp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 8,987 in East West Bancorp on August 23, 2024 and sell it today you would earn a total of 1,696 from holding East West Bancorp or generate 18.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Group vs. East West Bancorp
Performance |
| Timeline |
| Citizens Financial |
| East West Bancorp |
Citizens Financial and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and East West
The main advantage of trading using opposite Citizens Financial and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Citizens Financial vs. Capital One Financial | Citizens Financial vs. Capital One Financial | Citizens Financial vs. Bank of America | Citizens Financial vs. KeyCorp |
| East West vs. Barclays PLC ADR | East West vs. UBS Group AG | East West vs. ING Group NV | East West vs. Citigroup |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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