Correlation Between Dime Community and CIT Group
Can any of the company-specific risk be diversified away by investing in both Dime Community and CIT Group 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 Dime Community and CIT Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dime Community Bancshares and CIT Group Preferred, you can compare the effects of market volatilities on Dime Community and CIT Group 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 Dime Community with a short position of CIT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dime Community and CIT Group.
Diversification Opportunities for Dime Community and CIT Group
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dime and CIT is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and CIT Group Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIT Group Preferred and Dime Community 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 Dime Community Bancshares are associated (or correlated) with CIT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIT Group Preferred has no effect on the direction of Dime Community i.e., Dime Community and CIT Group go up and down completely randomly.
Pair Corralation between Dime Community and CIT Group
Assuming the 90 days horizon Dime Community is expected to generate 1.1 times less return on investment than CIT Group. In addition to that, Dime Community is 1.39 times more volatile than CIT Group Preferred. It trades about 0.03 of its total potential returns per unit of risk. CIT Group Preferred is currently generating about 0.05 per unit of volatility. If you would invest 1,839 in CIT Group Preferred on August 28, 2024 and sell it today you would earn a total of 568.00 from holding CIT Group Preferred or generate 30.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dime Community Bancshares vs. CIT Group Preferred
Performance |
| Timeline |
| Dime Community Bancshares |
| CIT Group Preferred |
Dime Community and CIT Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dime Community and CIT Group
The main advantage of trading using opposite Dime Community and CIT Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dime Community position performs unexpectedly, CIT Group 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 CIT Group will offset losses from the drop in CIT Group's long position.| Dime Community vs. First Citizens BancShares | Dime Community vs. Fifth Third Bancorp | Dime Community vs. OceanFirst Financial Corp | Dime Community vs. Fifth Third Bancorp |
| CIT Group vs. First Citizens BancShares | CIT Group vs. Texas Capital Bancshares | CIT Group vs. Dime Community Bancshares | CIT Group vs. Fifth Third 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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