Correlation Between International Bancshares and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both International Bancshares 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 International Bancshares and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Bancshares and Citizens Financial Group,, you can compare the effects of market volatilities on International Bancshares 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 International Bancshares with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Bancshares and Citizens Financial.
Diversification Opportunities for International Bancshares and Citizens Financial
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and Citizens is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, and International Bancshares 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 International Bancshares 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 Group, has no effect on the direction of International Bancshares i.e., International Bancshares and Citizens Financial go up and down completely randomly.
Pair Corralation between International Bancshares and Citizens Financial
Given the investment horizon of 90 days International Bancshares is expected to generate 1.07 times more return on investment than Citizens Financial. However, International Bancshares is 1.07 times more volatile than Citizens Financial Group,. It trades about 0.21 of its potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.17 per unit of risk. If you would invest 6,164 in International Bancshares on September 5, 2024 and sell it today you would earn a total of 1,043 from holding International Bancshares or generate 16.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Bancshares vs. Citizens Financial Group,
Performance |
| Timeline |
| International Bancshares |
| Citizens Financial Group, |
International Bancshares and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Bancshares and Citizens Financial
The main advantage of trading using opposite International Bancshares and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Bancshares 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.The idea behind International Bancshares and Citizens Financial Group, pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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