Correlation Between Citizens Financial and First Western

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

Diversification Opportunities for Citizens Financial and First Western

-0.31

Correlation Coefficient

Citizens Financial  First Western

Very good diversification

The 3 months correlation between Citizens and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and First Western Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Western 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 First Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Western Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and First Western go up and down completely randomly.

Pair Corralation between Citizens Financial and First Western

Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the First Western. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 1.78 times less risky than First Western. The preferred stock trades about -0.24 of its potential returns per unit of risk. The First Western Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,945  in First Western Financial on September 26, 2024 and sell it today you would lose (16.00) from holding First Western Financial or give up 0.82% of portfolio value over 90 days.

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

Citizens Financial Group  vs.  First Western Financial

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 weak performance in the last few months, the Preferred Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

First Western Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Western Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, First Western is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citizens Financial and First Western

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

The idea behind Citizens Financial Group and First Western 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.