Correlation Between Citizens Financial and Swiss Re

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

Diversification Opportunities for Citizens Financial and Swiss Re

0.55

Correlation Coefficient

Citizens Financial  Swiss Re

Very weak diversification

The 3 months correlation between Citizens and Swiss is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Corp and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of Citizens Financial i.e., Citizens Financial and Swiss Re go up and down completely randomly.

Pair Corralation between Citizens Financial and Swiss Re

Given the investment horizon of 90 days Citizens Financial Corp is expected to under-perform the Swiss Re. But the pink sheet apears to be less risky and, when comparing its historical volatility, Citizens Financial Corp is 1.14 times less risky than Swiss Re. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Swiss Re is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,645  in Swiss Re on September 28, 2024 and sell it today you would earn a total of  6.00  from holding Swiss Re or generate 0.16% return on investment over 90 days.

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

Citizens Financial Corp  vs.  Swiss Re

Citizens Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 9 (%) 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.

Swiss Re

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citizens Financial and Swiss Re

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

The idea behind Citizens Financial Corp and Swiss Re 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.