Correlation Between Heartland Financial and First Citizens

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

By analyzing existing cross correlation between Heartland Financial USA and First Citizens BancShares, you can compare the effects of market volatilities on Heartland Financial and First Citizens 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 Heartland Financial with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Financial and First Citizens.

Diversification Opportunities for Heartland Financial and First Citizens

-0.31

Correlation Coefficient

Heartland Financial  First Citizens

Very good diversification

The 3 months correlation between Heartland and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA and First Citizens BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens BancShares and Heartland Financial 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 Heartland Financial USA are associated (or correlated) with First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens BancShares has no effect on the direction of Heartland Financial i.e., Heartland Financial and First Citizens go up and down completely randomly.

Pair Corralation between Heartland Financial and First Citizens

Assuming the 90 days horizon Heartland Financial USA is expected to under-perform the First Citizens. But the preferred stock apears to be less risky and, when comparing its historical volatility, Heartland Financial USA is 1.21 times less risky than First Citizens. The preferred stock trades about -0.27 of its potential returns per unit of risk. The First Citizens BancShares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,266  in First Citizens BancShares on November 29, 2024 and sell it today you would earn a total of  7.00  from holding First Citizens BancShares or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.81%
Values	Daily Returns

Heartland Financial USA  vs.  First Citizens BancShares

Heartland Financial USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Financial USA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Heartland Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Heartland Financial and First Citizens

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

The idea behind Heartland Financial USA and First Citizens BancShares 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.