Correlation Between CNB Financial and First Citizens

Can any of the company-specific risk be diversified away by investing in both CNB 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 CNB 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 CNB Financial and First Citizens BancShares, you can compare the effects of market volatilities on CNB 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 CNB Financial with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNB Financial and First Citizens.

Diversification Opportunities for CNB Financial and First Citizens

0.26

Correlation Coefficient

CNB Financial  First Citizens

Modest diversification

The 3 months correlation between CNB and First is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CNB 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 CNB 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 CNB 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 CNB Financial i.e., CNB Financial and First Citizens go up and down completely randomly.

Pair Corralation between CNB Financial and First Citizens

Assuming the 90 days horizon CNB Financial is expected to generate 1.4 times less return on investment than First Citizens. But when comparing it to its historical volatility, CNB Financial is 1.57 times less risky than First Citizens. It trades about 0.01 of its potential returns per unit of risk. First Citizens BancShares is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,336  in First Citizens BancShares on September 4, 2024 and sell it today you would earn a total of  4.00  from holding First Citizens BancShares or generate 0.17% return on investment over 90 days.

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

CNB Financial  vs.  First Citizens BancShares

CNB Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNB Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, CNB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Citizens BancShares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, First Citizens may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CNB Financial and First Citizens

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

The idea behind CNB Financial 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.