Correlation Between First Citizens and Bank Ozk

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

Diversification Opportunities for First Citizens and Bank Ozk

0.75

Correlation Coefficient

First Citizens  Bank Ozk

Poor diversification

The 3 months correlation between First and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Bank Ozk Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk Preferred 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 Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk Preferred has no effect on the direction of First Citizens i.e., First Citizens and Bank Ozk go up and down completely randomly.

Pair Corralation between First Citizens and Bank Ozk

Assuming the 90 days horizon First Citizens BancShares is expected to generate 1.0 times more return on investment than Bank Ozk. However, First Citizens is 1.0 times more volatile than Bank Ozk Preferred. It trades about 0.07 of its potential returns per unit of risk. Bank Ozk Preferred is currently generating about 0.02 per unit of risk. If you would invest  2,192  in First Citizens BancShares on September 4, 2024 and sell it today you would earn a total of  112.00  from holding First Citizens BancShares or generate 5.11% return on investment over 90 days.

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

First Citizens BancShares  vs.  Bank Ozk Preferred

First Citizens BancShares

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 5 (%) 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.

Bank Ozk Preferred

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk Preferred are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Bank Ozk 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 Bank Ozk

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

The idea behind First Citizens BancShares and Bank Ozk Preferred 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.