Correlation Between Citizens Financial and Towne Bank
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Towne Bank 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 Towne Bank 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 Towne Bank, you can compare the effects of market volatilities on Citizens Financial and Towne Bank 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 Towne Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Towne Bank.
Diversification Opportunities for Citizens Financial and Towne Bank
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citizens and Towne is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Towne Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towne Bank 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 Towne Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towne Bank has no effect on the direction of Citizens Financial i.e., Citizens Financial and Towne Bank go up and down completely randomly.
Pair Corralation between Citizens Financial and Towne Bank
Assuming the 90 days trading horizon Citizens Financial is expected to generate 3.73 times less return on investment than Towne Bank. But when comparing it to its historical volatility, Citizens Financial Group is 1.99 times less risky than Towne Bank. It trades about 0.08 of its potential returns per unit of risk. Towne Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,629 in Towne Bank on August 30, 2024 and sell it today you would earn a total of 1,039 from holding Towne Bank or generate 39.52% 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. Towne Bank
Performance |
| Timeline |
| Citizens Financial |
| Towne Bank |
Citizens Financial and Towne Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and Towne Bank
The main advantage of trading using opposite Citizens Financial and Towne Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, Towne Bank 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 Towne Bank will offset losses from the drop in Towne Bank'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 |
| Towne Bank vs. Penns Woods Bancorp | Towne Bank vs. 1st Source | Towne Bank vs. Great Southern Bancorp | Towne Bank vs. Waterstone Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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