Correlation Between Citizens Financial and Texas Capital
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Texas Capital 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 Texas Capital 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 Texas Capital Bancshares, you can compare the effects of market volatilities on Citizens Financial and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Texas Capital.
Diversification Opportunities for Citizens Financial and Texas Capital
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citizens and Texas is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Citizens Financial i.e., Citizens Financial and Texas Capital go up and down completely randomly.
Pair Corralation between Citizens Financial and Texas Capital
Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the Texas Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 2.87 times less risky than Texas Capital. The preferred stock trades about -0.15 of its potential returns per unit of risk. The Texas Capital Bancshares is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 7,818 in Texas Capital Bancshares on August 28, 2024 and sell it today you would earn a total of 1,150 from holding Texas Capital Bancshares or generate 14.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Group vs. Texas Capital Bancshares
Performance |
| Timeline |
| Citizens Financial |
| Texas Capital Bancshares |
Citizens Financial and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and Texas Capital
The main advantage of trading using opposite Citizens Financial and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.| Citizens Financial vs. Capital One Financial | Citizens Financial vs. Capital One Financial | Citizens Financial vs. Bank of America |
| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American Bancorp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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