Correlation Between Citizens Financial and National Australia

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

By analyzing existing cross correlation between Citizens Financial Corp and National Australia Bank, you can compare the effects of market volatilities on Citizens Financial and National Australia 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 National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and National Australia.

Diversification Opportunities for Citizens Financial and National Australia

-0.08

Correlation Coefficient

Citizens Financial  National Australia

Good diversification

The 3 months correlation between Citizens and National is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank 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 Corp are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Citizens Financial i.e., Citizens Financial and National Australia go up and down completely randomly.

Pair Corralation between Citizens Financial and National Australia

Given the investment horizon of 90 days Citizens Financial Corp is expected to generate 1.93 times more return on investment than National Australia. However, Citizens Financial is 1.93 times more volatile than National Australia Bank. It trades about 0.13 of its potential returns per unit of risk. National Australia Bank is currently generating about -0.11 per unit of risk. If you would invest  2,006  in Citizens Financial Corp on September 25, 2024 and sell it today you would earn a total of  419.00  from holding Citizens Financial Corp or generate 20.89% return on investment over 90 days.

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

Citizens Financial Corp  vs.  National Australia Bank

Citizens Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

National Australia Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citizens Financial and National Australia

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

The idea behind Citizens Financial Corp and National Australia Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.