Correlation Between First Citizens and HomeTrust Bancshares

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

Diversification Opportunities for First Citizens and HomeTrust Bancshares

0.83

Correlation Coefficient

First Citizens  HomeTrust Bancshares

Very poor diversification

The 3 months correlation between First and HomeTrust is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares 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 HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of First Citizens i.e., First Citizens and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between First Citizens and HomeTrust Bancshares

Assuming the 90 days horizon First Citizens BancShares is expected to generate 1.03 times more return on investment than HomeTrust Bancshares. However, First Citizens is 1.03 times more volatile than HomeTrust Bancshares. It trades about -0.24 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about -0.35 per unit of risk. If you would invest  233,904  in First Citizens BancShares on September 26, 2024 and sell it today you would lose (18,606) from holding First Citizens BancShares or give up 7.95% 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.  HomeTrust Bancshares

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.

HomeTrust Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Citizens and HomeTrust Bancshares

The main advantage of trading using opposite First Citizens and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Citizens position performs unexpectedly, HomeTrust Bancshares 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 HomeTrust Bancshares will offset losses from the drop in HomeTrust Bancshares' long position.

The idea behind First Citizens BancShares and HomeTrust 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.