Correlation Between Citizens Financial and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Citizens Financial and US Bancorp 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 US Bancorp 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 US Bancorp, you can compare the effects of market volatilities on Citizens Financial and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and US Bancorp.
Diversification Opportunities for Citizens Financial and US Bancorp
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Citizens and USB-PR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Citizens Financial i.e., Citizens Financial and US Bancorp go up and down completely randomly.
Pair Corralation between Citizens Financial and US Bancorp
Assuming the 90 days trading horizon Citizens Financial Group is expected to generate 0.82 times more return on investment than US Bancorp. However, Citizens Financial Group is 1.23 times less risky than US Bancorp. It trades about -0.15 of its potential returns per unit of risk. US Bancorp is currently generating about -0.13 per unit of risk. If you would invest 2,176 in Citizens Financial Group on August 27, 2024 and sell it today you would lose (72.00) from holding Citizens Financial Group or give up 3.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Group vs. US Bancorp
Performance |
| Timeline |
| Citizens Financial |
| US Bancorp |
Citizens Financial and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and US Bancorp
The main advantage of trading using opposite Citizens Financial and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Citizens Financial vs. Capital One Financial | Citizens Financial vs. Capital One Financial | Citizens Financial vs. Bank of America |
| US Bancorp vs. US Bancorp | US Bancorp vs. Bank of America | US Bancorp vs. US Bancorp | US Bancorp vs. Wells Fargo |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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