Correlation Between Citizens Financial and First Horizon
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and First Horizon 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 First Horizon 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 First Horizon, you can compare the effects of market volatilities on Citizens Financial and First Horizon 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 First Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and First Horizon.
Diversification Opportunities for Citizens Financial and First Horizon
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citizens and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Citizens Financial i.e., Citizens Financial and First Horizon go up and down completely randomly.
Pair Corralation between Citizens Financial and First Horizon
Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the First Horizon. In addition to that, Citizens Financial is 4.92 times more volatile than First Horizon. It trades about -0.18 of its total potential returns per unit of risk. First Horizon is currently generating about 0.14 per unit of volatility. If you would invest 2,500 in First Horizon on December 8, 2024 and sell it today you would earn a total of 11.00 from holding First Horizon or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Citizens Financial Group vs. First Horizon
Performance |
| Timeline |
| Citizens Financial |
| First Horizon |
Citizens Financial and First Horizon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and First Horizon
The main advantage of trading using opposite Citizens Financial and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, First Horizon 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 First Horizon will offset losses from the drop in First Horizon'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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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