Correlation Between Veritex Holdings and First Citizens

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

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

Diversification Opportunities for Veritex Holdings and First Citizens

0.88

Correlation Coefficient

Veritex Holdings  First Citizens

Very poor diversification

The 3 months correlation between Veritex and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings i.e., Veritex Holdings and First Citizens go up and down completely randomly.

Pair Corralation between Veritex Holdings and First Citizens

Given the investment horizon of 90 days Veritex Holdings is expected to generate 0.74 times more return on investment than First Citizens. However, Veritex Holdings is 1.35 times less risky than First Citizens. It trades about 0.16 of its potential returns per unit of risk. First Citizens BancShares is currently generating about 0.08 per unit of risk. If you would invest  2,421  in Veritex Holdings on September 5, 2024 and sell it today you would earn a total of  581.00  from holding Veritex Holdings or generate 24.0% return on investment over 90 days.

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

Veritex Holdings  vs.  First Citizens BancShares

Veritex Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Veritex Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

First Citizens BancShares

Risk-Adjusted Performance

6 of 100

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.

Pair Trading with Veritex Holdings and First Citizens

The main advantage of trading using opposite Veritex Holdings and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veritex Holdings 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 Veritex Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.