Correlation Between Citizens Financial and Pinnacle Financial

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

Diversification Opportunities for Citizens Financial and Pinnacle Financial

0.96

Correlation Coefficient

Citizens Financial  Pinnacle Financial

Almost no diversification

The 3 months correlation between Citizens and Pinnacle is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Pinnacle Financial Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle 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 Pinnacle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Financial has no effect on the direction of Citizens Financial i.e., Citizens Financial and Pinnacle Financial go up and down completely randomly.

Pair Corralation between Citizens Financial and Pinnacle Financial

Considering the 90-day investment horizon Citizens Financial is expected to generate 1.92 times less return on investment than Pinnacle Financial. But when comparing it to its historical volatility, Citizens Financial Group, is 1.14 times less risky than Pinnacle Financial. It trades about 0.1 of its potential returns per unit of risk. Pinnacle Financial Partners is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,797  in Pinnacle Financial Partners on August 31, 2024 and sell it today you would earn a total of  2,928  from holding Pinnacle Financial Partners or generate 29.89% return on investment over 90 days.

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

Citizens Financial Group,  vs.  Pinnacle Financial Partners

Citizens Financial Group,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pinnacle Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Financial Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Pinnacle Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citizens Financial and Pinnacle Financial

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

The idea behind Citizens Financial Group, and Pinnacle Financial Partners 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.