Correlation Between Wells Fargo and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Citizens Financial Group, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Citizens Financial.
Diversification Opportunities for Wells Fargo and Citizens Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Citizens is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Citizens Financial go up and down completely randomly.
Pair Corralation between Wells Fargo and Citizens Financial
Assuming the 90 days trading horizon Wells Fargo is expected to generate 3.74 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, Wells Fargo is 1.37 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 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,869 in Citizens Financial Group on August 24, 2024 and sell it today you would earn a total of 196.00 from holding Citizens Financial Group or generate 10.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Citizens Financial Group
Performance |
| Timeline |
| Wells Fargo |
| Citizens Financial |
Wells Fargo and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Citizens Financial
The main advantage of trading using opposite Wells Fargo and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Capital One Financial | Wells Fargo vs. Bank of America | Wells Fargo vs. Wells Fargo | Wells Fargo vs. Capital One Financial |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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