Correlation Between Banc Of and First Citizens

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

By analyzing existing cross correlation between Banc of California and First Citizens BancShares, you can compare the effects of market volatilities on Banc Of and First Citizens 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 Banc Of with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banc Of and First Citizens.

Diversification Opportunities for Banc Of and First Citizens

-0.42

Correlation Coefficient

Banc Of  First Citizens

Very good diversification

The 3 months correlation between Banc and First is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Banc of California and First Citizens BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens BancShares and Banc Of 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 Banc of California are associated (or correlated) with First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens BancShares has no effect on the direction of Banc Of i.e., Banc Of and First Citizens go up and down completely randomly.

Pair Corralation between Banc Of and First Citizens

Assuming the 90 days trading horizon Banc of California is expected to generate 0.55 times more return on investment than First Citizens. However, Banc of California is 1.81 times less risky than First Citizens. It trades about -0.21 of its potential returns per unit of risk. First Citizens BancShares is currently generating about -0.43 per unit of risk. If you would invest  2,500  in Banc of California on September 29, 2024 and sell it today you would lose (48.00) from holding Banc of California or give up 1.92% of portfolio value over 90 days.

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

Banc of California  vs.  First Citizens BancShares

Banc of California

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banc of California are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Banc Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Citizens BancShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Citizens BancShares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, First Citizens is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Banc Of and First Citizens

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

The idea behind Banc of California and First Citizens BancShares 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.