Correlation Between First Citizens and PT Bank

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

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

Diversification Opportunities for First Citizens and PT Bank

-0.47

Correlation Coefficient

First Citizens  PT Bank

Very good diversification

The 3 months correlation between First and PBCRF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central and First Citizens 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 First Citizens BancShares are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Central has no effect on the direction of First Citizens i.e., First Citizens and PT Bank go up and down completely randomly.

Pair Corralation between First Citizens and PT Bank

Assuming the 90 days horizon First Citizens BancShares is expected to generate 0.88 times more return on investment than PT Bank. However, First Citizens BancShares is 1.13 times less risky than PT Bank. It trades about 0.08 of its potential returns per unit of risk. PT Bank Central is currently generating about 0.02 per unit of risk. If you would invest  200,615  in First Citizens BancShares on September 3, 2024 and sell it today you would earn a total of  28,885  from holding First Citizens BancShares or generate 14.4% return on investment over 90 days.

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

First Citizens BancShares  vs.  PT Bank Central

First Citizens BancShares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, First Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Central

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Central are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Citizens and PT Bank

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

The idea behind First Citizens BancShares and PT Bank Central 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.