Correlation Between US Bancorp and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp PERP and Citizens Financial Group, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Citizens Financial.
Diversification Opportunities for US Bancorp and Citizens Financial
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between USB-PA and Citizens is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp PERP and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and US Bancorp 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 US Bancorp PERP 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 US Bancorp i.e., US Bancorp and Citizens Financial go up and down completely randomly.
Pair Corralation between US Bancorp and Citizens Financial
Assuming the 90 days trading horizon US Bancorp is expected to generate 2.74 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, US Bancorp PERP is 2.18 times less risky than Citizens Financial. It trades about 0.09 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,964 in Citizens Financial Group on November 9, 2024 and sell it today you would earn a total of 72.00 from holding Citizens Financial Group or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp PERP vs. Citizens Financial Group
Performance |
| Timeline |
| US Bancorp PERP |
| Citizens Financial |
US Bancorp and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Citizens Financial
The main advantage of trading using opposite US Bancorp and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial | US Bancorp vs. US Bancorp | US Bancorp vs. KeyCorp |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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