Correlation Between Capital One and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Capital One and Citizens Financial 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 Capital One and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Citizens Financial Group, you can compare the effects of market volatilities on Capital One and Citizens Financial 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 Capital One with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Citizens Financial.
Diversification Opportunities for Capital One and Citizens Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Citizens is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Capital One 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 Capital One Financial are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Capital One i.e., Capital One and Citizens Financial go up and down completely randomly.
Pair Corralation between Capital One and Citizens Financial
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.7 times more return on investment than Citizens Financial. However, Capital One Financial is 1.44 times less risky than Citizens Financial. It trades about 0.03 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.02 per unit of risk. If you would invest 1,739 in Capital One Financial on August 23, 2024 and sell it today you would earn a total of 291.00 from holding Capital One Financial or generate 16.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Citizens Financial Group
Performance |
| Timeline |
| Capital One Financial |
| Citizens Financial |
Capital One and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Citizens Financial
The main advantage of trading using opposite Capital One and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.| Capital One vs. Capital One Financial | Capital One vs. Bank of America | Capital One vs. Wells Fargo | Capital One vs. Bank of America |
| Citizens Financial vs. Capital One Financial | Citizens Financial vs. Capital One Financial | Citizens Financial vs. Bank of America | Citizens Financial vs. KeyCorp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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