Correlation Between First Citizens and Valley National

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

Diversification Opportunities for First Citizens and Valley National

0.45

Correlation Coefficient

First Citizens  Valley National

Very weak diversification

The 3 months correlation between First and Valley is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Citizens BancShares and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National 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 Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of First Citizens i.e., First Citizens and Valley National go up and down completely randomly.

Pair Corralation between First Citizens and Valley National

Assuming the 90 days horizon First Citizens is expected to generate 1.71 times less return on investment than Valley National. In addition to that, First Citizens is 1.61 times more volatile than Valley National Bancorp. It trades about 0.03 of its total potential returns per unit of risk. Valley National Bancorp is currently generating about 0.07 per unit of volatility. If you would invest  2,426  in Valley National Bancorp on September 12, 2024 and sell it today you would earn a total of  78.00  from holding Valley National Bancorp or generate 3.22% return on investment over 90 days.

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

First Citizens BancShares  vs.  Valley National Bancorp

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.

Valley National Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Valley National 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 Valley National

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

The idea behind First Citizens BancShares and Valley National 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .