Correlation Between Truist Financial and First Citizens
Can any of the company-specific risk be diversified away by investing in both Truist Financial and First Citizens 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 Truist Financial and First Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Truist Financial and First Citizens BancShares, you can compare the effects of market volatilities on Truist Financial and First Citizens 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 Truist Financial with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and First Citizens.
Diversification Opportunities for Truist Financial and First Citizens
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Truist and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and First Citizens BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens BancShares and Truist Financial 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 Truist Financial are associated (or correlated) with First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens BancShares has no effect on the direction of Truist Financial i.e., Truist Financial and First Citizens go up and down completely randomly.
Pair Corralation between Truist Financial and First Citizens
Assuming the 90 days trading horizon Truist Financial is expected to under-perform the First Citizens. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 3.8 times less risky than First Citizens. The preferred stock trades about -0.05 of its potential returns per unit of risk. The First Citizens BancShares is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 199,033 in First Citizens BancShares on August 29, 2024 and sell it today you would earn a total of 33,563 from holding First Citizens BancShares or generate 16.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Truist Financial vs. First Citizens BancShares
Performance |
| Timeline |
| Truist Financial |
| First Citizens BancShares |
Truist Financial and First Citizens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Truist Financial and First Citizens
The main advantage of trading using opposite Truist Financial and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial position performs unexpectedly, First Citizens 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 First Citizens will offset losses from the drop in First Citizens' long position.| Truist Financial vs. Truist Financial | Truist Financial vs. MetLife Preferred Stock | Truist Financial vs. US Bancorp |
| First Citizens vs. Zions Bancorporation | First Citizens vs. KeyCorp | First Citizens vs. Comerica | First Citizens vs. First Horizon National |
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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