Correlation Between Bankinter and First Citizens

Can any of the company-specific risk be diversified away by investing in both Bankinter 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 Bankinter and First Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bankinter SA ADR and First Citizens BancShares, you can compare the effects of market volatilities on Bankinter 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 Bankinter with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and First Citizens.

Diversification Opportunities for Bankinter and First Citizens

-0.73

Correlation Coefficient

Bankinter  First Citizens

Pay attention - limited upside

The 3 months correlation between Bankinter and First is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter SA ADR 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 Bankinter 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 Bankinter SA ADR 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 Bankinter i.e., Bankinter and First Citizens go up and down completely randomly.

Pair Corralation between Bankinter and First Citizens

Assuming the 90 days horizon Bankinter SA ADR is expected to under-perform the First Citizens. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bankinter SA ADR is 1.08 times less risky than First Citizens. The pink sheet trades about -0.04 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  182,391  in First Citizens BancShares on September 12, 2024 and sell it today you would earn a total of  27,277  from holding First Citizens BancShares or generate 14.96% return on investment over 90 days.

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

Bankinter SA ADR  vs.  First Citizens BancShares

Bankinter SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankinter SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Citizens BancShares

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, First Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bankinter and First Citizens

The main advantage of trading using opposite Bankinter and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankinter 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.

The idea behind Bankinter SA ADR and First Citizens BancShares 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.