Correlation Between First Citizens and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Citizens and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on First Citizens and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Citizens and Dow Jones.
Diversification Opportunities for First Citizens and Dow Jones
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of First Citizens i.e., First Citizens and Dow Jones go up and down completely randomly.
Pair Corralation between First Citizens and Dow Jones
Assuming the 90 days horizon First Citizens BancShares is expected to generate 4.33 times more return on investment than Dow Jones. However, First Citizens is 4.33 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.34 per unit of risk. If you would invest 171,329 in First Citizens BancShares on September 2, 2024 and sell it today you would earn a total of 20,671 from holding First Citizens BancShares or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Citizens BancShares vs. Dow Jones Industrial
Performance |
| Timeline |
First Citizens and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Citizens BancShares
Pair trading matchups for First Citizens
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Citizens and Dow Jones
The main advantage of trading using opposite First Citizens and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Citizens position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| First Citizens vs. First Citizens BancShares | First Citizens vs. Farmers And Merchants | First Citizens vs. Fentura Financial | First Citizens vs. First Keystone Corp |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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