Correlation Between Citizens Financial and CullenFrost Bankers

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and CullenFrost Bankers 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 CullenFrost Bankers 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 CullenFrost Bankers, you can compare the effects of market volatilities on Citizens Financial and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and CullenFrost Bankers.

Diversification Opportunities for Citizens Financial and CullenFrost Bankers

-0.84

Correlation Coefficient

Citizens Financial  CullenFrost Bankers

Pay attention - limited upside

The 3 months correlation between Citizens and CullenFrost is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of Citizens Financial i.e., Citizens Financial and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between Citizens Financial and CullenFrost Bankers

Assuming the 90 days trading horizon Citizens Financial is expected to generate 3.8 times less return on investment than CullenFrost Bankers. But when comparing it to its historical volatility, Citizens Financial Group is 1.68 times less risky than CullenFrost Bankers. It trades about 0.03 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,371  in CullenFrost Bankers on September 12, 2024 and sell it today you would earn a total of  3,463  from holding CullenFrost Bankers or generate 33.39% return on investment over 90 days.

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

Citizens Financial Group  vs.  CullenFrost Bankers

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 latest inconsistent performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CullenFrost Bankers

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CullenFrost Bankers are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, CullenFrost Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and CullenFrost Bankers

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

The idea behind Citizens Financial Group and CullenFrost Bankers 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.