Correlation Between First Citizens and Northern Trust

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

Diversification Opportunities for First Citizens and Northern Trust

0.38

Correlation Coefficient

First Citizens  Northern Trust

Weak diversification

The 3 months correlation between First and Northern is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust 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 Northern Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Trust has no effect on the direction of First Citizens i.e., First Citizens and Northern Trust go up and down completely randomly.

Pair Corralation between First Citizens and Northern Trust

Assuming the 90 days horizon First Citizens BancShares is expected to under-perform the Northern Trust. In addition to that, First Citizens is 1.49 times more volatile than Northern Trust. It trades about -0.07 of its total potential returns per unit of risk. Northern Trust is currently generating about 0.03 per unit of volatility. If you would invest  1,952  in Northern Trust on December 30, 2024 and sell it today you would earn a total of  34.00  from holding Northern Trust or generate 1.74% 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.  Northern Trust

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.

Northern Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Northern Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Citizens and Northern Trust

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

The idea behind First Citizens BancShares and Northern Trust 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.