Correlation Between First Republic and CIT Group

Can any of the company-specific risk be diversified away by investing in both First Republic and CIT Group 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 Republic and CIT Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Republic Bank and CIT Group Preferred, you can compare the effects of market volatilities on First Republic and CIT Group 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 Republic with a short position of CIT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and CIT Group.

Diversification Opportunities for First Republic and CIT Group

-0.52

Correlation Coefficient

First Republic  CIT Group

Excellent diversification

The 3 months correlation between First and CIT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and CIT Group Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIT Group Preferred and First Republic 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 Republic Bank are associated (or correlated) with CIT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIT Group Preferred has no effect on the direction of First Republic i.e., First Republic and CIT Group go up and down completely randomly.

Pair Corralation between First Republic and CIT Group

If you would invest  2,306  in CIT Group Preferred on September 6, 2024 and sell it today you would earn a total of  5.00  from holding CIT Group Preferred or generate 0.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

First Republic Bank  vs.  CIT Group Preferred

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, First Republic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CIT Group Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIT Group Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, CIT Group 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 Republic and CIT Group

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

The idea behind First Republic Bank and CIT Group 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.