Correlation Between National Capital and First Citizens

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

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

Diversification Opportunities for National Capital and First Citizens

0.2

Correlation Coefficient

National Capital  First Citizens

Modest diversification

The 3 months correlation between National and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and The First Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens and National Capital 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 National Capital Bank 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 has no effect on the direction of National Capital i.e., National Capital and First Citizens go up and down completely randomly.

Pair Corralation between National Capital and First Citizens

Given the investment horizon of 90 days National Capital Bank is expected to generate 0.18 times more return on investment than First Citizens. However, National Capital Bank is 5.68 times less risky than First Citizens. It trades about -0.04 of its potential returns per unit of risk. The First Citizens is currently generating about -0.15 per unit of risk. If you would invest  7,000  in National Capital Bank on May 1, 2025 and sell it today you would lose (500.00) from holding National Capital Bank or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.13%
Values	Daily Returns

National Capital Bank  vs.  The First Citizens

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, National Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Citizens

Risk-Adjusted Performance

Very Weak

Over the last 90 days The First Citizens has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in August 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with National Capital and First Citizens

The main advantage of trading using opposite National Capital and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank and The First Citizens 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.