Correlation Between PT Bank and First Citizens

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

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

Diversification Opportunities for PT Bank and First Citizens

0.63

Correlation Coefficient

PT Bank  First Citizens

Poor diversification

The 3 months correlation between PBCRF and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central 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 PT Bank 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 PT Bank Central 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 PT Bank i.e., PT Bank and First Citizens go up and down completely randomly.

Pair Corralation between PT Bank and First Citizens

Assuming the 90 days horizon PT Bank Central is expected to generate 2.72 times more return on investment than First Citizens. However, PT Bank is 2.72 times more volatile than First Citizens BancShares. It trades about -0.01 of its potential returns per unit of risk. First Citizens BancShares is currently generating about -0.09 per unit of risk. If you would invest  57.00  in PT Bank Central on December 28, 2024 and sell it today you would lose (6.00) from holding PT Bank Central or give up 10.53% of portfolio value over 90 days.

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

PT Bank Central  vs.  First Citizens BancShares

PT Bank Central

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite latest abnormal performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PT Bank and First Citizens

The main advantage of trading using opposite PT Bank and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Central 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 Stocks Directory module to find actively traded stocks across global markets.