Correlation Between Truist Financial and Citizens Financial

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

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

Diversification Opportunities for Truist Financial and Citizens Financial

0.87

Correlation Coefficient

Truist Financial  Citizens Financial

Very poor diversification

The 3 months correlation between Truist and Citizens is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Truist 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 Truist Financial 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 Truist Financial i.e., Truist Financial and Citizens Financial go up and down completely randomly.

Pair Corralation between Truist Financial and Citizens Financial

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the Citizens Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 1.22 times less risky than Citizens Financial. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Citizens Financial Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,991  in Citizens Financial Group on February 21, 2024 and sell it today you would lose (3.00) from holding Citizens Financial Group or give up 0.15% of portfolio value over 90 days.

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

Truist Financial  vs.  Citizens Financial Group

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Citizens Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Truist Financial and Citizens Financial

The main advantage of trading using opposite Truist Financial and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial 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 Truist Financial 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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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.