Correlation Between First Citizens and CNB Financial

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

Diversification Opportunities for First Citizens and CNB Financial

0.07

Correlation Coefficient

First Citizens  CNB Financial

Significant diversification

The 3 months correlation between First and CNB is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial 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 CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of First Citizens i.e., First Citizens and CNB Financial go up and down completely randomly.

Pair Corralation between First Citizens and CNB Financial

Assuming the 90 days horizon First Citizens is expected to generate 1.15 times less return on investment than CNB Financial. But when comparing it to its historical volatility, First Citizens BancShares is 1.33 times less risky than CNB Financial. It trades about 0.07 of its potential returns per unit of risk. CNB Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,950  in CNB Financial on September 12, 2024 and sell it today you would earn a total of  553.00  from holding CNB Financial or generate 28.36% return on investment over 90 days.

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

First Citizens BancShares  vs.  CNB Financial

First Citizens BancShares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, First Citizens is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

CNB Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNB Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, CNB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Citizens and CNB Financial

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

The idea behind First Citizens BancShares and CNB Financial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.