Correlation Between Citizens Financial and Capital One

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and Capital One 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 Citizens Financial and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citizens Financial Group and Capital One Financial, you can compare the effects of market volatilities on Citizens Financial and Capital One 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 Citizens Financial with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Capital One.

Diversification Opportunities for Citizens Financial and Capital One

0.85

Correlation Coefficient

Citizens Financial  Capital One

Very poor diversification

The 3 months correlation between Citizens and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Citizens Financial 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 Citizens Financial Group are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and Capital One go up and down completely randomly.

Pair Corralation between Citizens Financial and Capital One

Assuming the 90 days trading horizon Citizens Financial Group is expected to generate 1.23 times more return on investment than Capital One. However, Citizens Financial is 1.23 times more volatile than Capital One Financial. It trades about 0.07 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.07 per unit of risk. If you would invest  1,732  in Citizens Financial Group on August 15, 2024 and sell it today you would earn a total of  396.00  from holding Citizens Financial Group or generate 22.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citizens Financial Group  vs.  Capital One Financial

Citizens Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Capital One Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, Capital One is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Citizens Financial and Capital One

The main advantage of trading using opposite Citizens Financial and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.

The idea behind Citizens Financial Group and Capital One Financial 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.

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.