Correlation Between First Citizens and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both First Citizens and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp, you can compare the effects of market volatilities on First Citizens and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Citizens and Merchants Bancorp.
Diversification Opportunities for First Citizens and Merchants Bancorp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Merchants is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of First Citizens i.e., First Citizens and Merchants Bancorp go up and down completely randomly.
Pair Corralation between First Citizens and Merchants Bancorp
Assuming the 90 days horizon First Citizens BancShares is expected to generate 1.02 times more return on investment than Merchants Bancorp. However, First Citizens is 1.02 times more volatile than Merchants Bancorp. It trades about -0.01 of its potential returns per unit of risk. Merchants Bancorp is currently generating about -0.08 per unit of risk. If you would invest 2,359 in First Citizens BancShares on August 27, 2024 and sell it today you would lose (13.00) from holding First Citizens BancShares or give up 0.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Citizens BancShares vs. Merchants Bancorp
Performance |
| Timeline |
| First Citizens BancShares |
| Merchants Bancorp |
First Citizens and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Citizens and Merchants Bancorp
The main advantage of trading using opposite First Citizens and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Citizens position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| First Citizens vs. Fifth Third Bancorp | First Citizens vs. Dime Community Bancshares | First Citizens vs. Fifth Third Bancorp | First Citizens vs. Northern Trust |
| Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Bank of America |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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