Correlation Between Citizens Financial and Postal Savings

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

Diversification Opportunities for Citizens Financial and Postal Savings

0.35

Correlation Coefficient

Citizens Financial  Postal Savings

Weak diversification

The 3 months correlation between Citizens and Postal is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings 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 Group are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Citizens Financial i.e., Citizens Financial and Postal Savings go up and down completely randomly.

Pair Corralation between Citizens Financial and Postal Savings

Assuming the 90 days trading horizon Citizens Financial is expected to generate 16.27 times less return on investment than Postal Savings. But when comparing it to its historical volatility, Citizens Financial Group is 24.49 times less risky than Postal Savings. It trades about 0.17 of its potential returns per unit of risk. Postal Savings Bank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Postal Savings Bank on March 9, 2024 and sell it today you would earn a total of  3.65  from holding Postal Savings Bank or generate 7.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citizens Financial Group  vs.  Postal Savings Bank

Citizens Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Citizens Financial is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Postal Savings Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Postal Savings may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Citizens Financial and Postal Savings

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

The idea behind Citizens Financial Group and Postal Savings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.