Correlation Between First Citizens and Merchants Bancorp

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

Diversification Opportunities for First Citizens and Merchants Bancorp

0.0

Correlation Coefficient

First Citizens  Merchants Bancorp

Pay attention - limited upside

The 3 months correlation between First and Merchants is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of First Citizens i.e., First Citizens and Merchants Bancorp go up and down completely randomly.

Pair Corralation between First Citizens and Merchants Bancorp

If you would invest (100.00) in Merchants Bancorp on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Merchants Bancorp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Citizens BancShares  vs.  Merchants Bancorp

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 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.

Merchants Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Merchants Bancorp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Citizens and Merchants Bancorp

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

The idea behind First Citizens BancShares and Merchants Bancorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.