Correlation Between First Citizens and Heartland Financial

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

Diversification Opportunities for First Citizens and Heartland Financial

0.39

Correlation Coefficient

First Citizens  Heartland Financial

Weak diversification

The 3 months correlation between First and Heartland is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA 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 Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of First Citizens i.e., First Citizens and Heartland Financial go up and down completely randomly.

Pair Corralation between First Citizens and Heartland Financial

Assuming the 90 days horizon First Citizens BancShares is expected to generate 2.69 times more return on investment than Heartland Financial. However, First Citizens is 2.69 times more volatile than Heartland Financial USA. It trades about 0.09 of its potential returns per unit of risk. Heartland Financial USA is currently generating about 0.08 per unit of risk. If you would invest  2,224  in First Citizens BancShares on August 31, 2024 and sell it today you would earn a total of  127.00  from holding First Citizens BancShares or generate 5.71% 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.  Heartland Financial USA

First Citizens BancShares

Risk-Adjusted Performance

6 of 100

Modest

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. 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.

Heartland Financial USA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Heartland Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Citizens and Heartland Financial

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

The idea behind First Citizens BancShares and Heartland Financial USA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.