Correlation Between First Citizens and State Street

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

Diversification Opportunities for First Citizens and State Street

0.64

Correlation Coefficient

First Citizens  State Street

Poor diversification

The 3 months correlation between First and State is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of First Citizens i.e., First Citizens and State Street go up and down completely randomly.

Pair Corralation between First Citizens and State Street

Assuming the 90 days horizon First Citizens BancShares is expected to generate 2.43 times more return on investment than State Street. However, First Citizens is 2.43 times more volatile than State Street. It trades about -0.02 of its potential returns per unit of risk. State Street is currently generating about -0.1 per unit of risk. If you would invest  2,311  in First Citizens BancShares on September 23, 2024 and sell it today you would lose (47.00) from holding First Citizens BancShares or give up 2.03% of portfolio value over 90 days.

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

First Citizens BancShares  vs.  State Street

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.

State Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Citizens and State Street

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

The idea behind First Citizens BancShares and State Street 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.