Correlation Between First Citizens and Cadence Bank

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

Diversification Opportunities for First Citizens and Cadence Bank

0.2

Correlation Coefficient

First Citizens  Cadence Bank

Modest diversification

The 3 months correlation between First and Cadence is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Cadence Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bank 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 Cadence Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bank has no effect on the direction of First Citizens i.e., First Citizens and Cadence Bank go up and down completely randomly.

Pair Corralation between First Citizens and Cadence Bank

Assuming the 90 days horizon First Citizens BancShares is expected to under-perform the Cadence Bank. In addition to that, First Citizens is 1.21 times more volatile than Cadence Bank. It trades about -0.07 of its total potential returns per unit of risk. Cadence Bank is currently generating about 0.14 per unit of volatility. If you would invest  1,956  in Cadence Bank on December 30, 2024 and sell it today you would earn a total of  202.00  from holding Cadence Bank or generate 10.33% return on investment over 90 days.

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

First Citizens BancShares  vs.  Cadence Bank

First Citizens BancShares

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Citizens BancShares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Preferred Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Cadence Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cadence Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Citizens and Cadence Bank

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

The idea behind First Citizens BancShares and Cadence Bank 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.