Correlation Between First Citizens and Western Alliance
Can any of the company-specific risk be diversified away by investing in both First Citizens and Western Alliance 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 Western Alliance 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 Western Alliance Bancorporation, you can compare the effects of market volatilities on First Citizens and Western Alliance 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 Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Citizens and Western Alliance.
Diversification Opportunities for First Citizens and Western Alliance
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Western is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of First Citizens i.e., First Citizens and Western Alliance go up and down completely randomly.
Pair Corralation between First Citizens and Western Alliance
Assuming the 90 days horizon First Citizens is expected to generate 2.0 times less return on investment than Western Alliance. But when comparing it to its historical volatility, First Citizens BancShares is 1.01 times less risky than Western Alliance. It trades about 0.07 of its potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,751 in Western Alliance Bancorporation on September 3, 2024 and sell it today you would earn a total of 444.00 from holding Western Alliance Bancorporation or generate 25.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Citizens BancShares vs. Western Alliance Bancorp.
Performance |
| Timeline |
| First Citizens BancShares |
| Western Alliance Ban |
First Citizens and Western Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Citizens and Western Alliance
The main advantage of trading using opposite First Citizens and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Citizens position performs unexpectedly, Western Alliance 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 Western Alliance will offset losses from the drop in Western Alliance'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 |
| Western Alliance vs. New York Community | Western Alliance vs. Bank of Hawaii | Western Alliance vs. US Bancorp | Western Alliance vs. Truist Financial |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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