Correlation Between Truist Financial and First Citizens

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Can any of the company-specific risk be diversified away by investing in both Truist 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 Truist 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 Truist Financial and First Citizens BancShares, you can compare the effects of market volatilities on Truist 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 Truist Financial with a short position of First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and First Citizens.

Diversification Opportunities for Truist Financial and First Citizens

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Truist and First is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial 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 Truist 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 Truist Financial 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 Truist Financial i.e., Truist Financial and First Citizens go up and down completely randomly.

Pair Corralation between Truist Financial and First Citizens

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the First Citizens. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 3.54 times less risky than First Citizens. The preferred stock trades about -0.07 of its potential returns per unit of risk. The First Citizens BancShares is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  195,077  in First Citizens BancShares on September 5, 2024 and sell it today you would earn a total of  25,912  from holding First Citizens BancShares or generate 13.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Truist Financial  vs.  First Citizens BancShares

 Performance 
       Timeline  
Truist Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
First Citizens BancShares 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, First Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Truist Financial and First Citizens Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Truist Financial and First Citizens

The main advantage of trading using opposite Truist Financial and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist 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 Truist Financial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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