Correlation Between First Commonwealth and ST Bancorp
Can any of the company-specific risk be diversified away by investing in both First Commonwealth and ST Bancorp 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 First Commonwealth and ST Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Commonwealth Financial and ST Bancorp, you can compare the effects of market volatilities on First Commonwealth and ST Bancorp 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 First Commonwealth with a short position of ST Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Commonwealth and ST Bancorp.
Diversification Opportunities for First Commonwealth and ST Bancorp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and STBA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp and First Commonwealth 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 First Commonwealth Financial are associated (or correlated) with ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of First Commonwealth i.e., First Commonwealth and ST Bancorp go up and down completely randomly.
Pair Corralation between First Commonwealth and ST Bancorp
Considering the 90-day investment horizon First Commonwealth Financial is expected to generate 1.13 times more return on investment than ST Bancorp. However, First Commonwealth is 1.13 times more volatile than ST Bancorp. It trades about 0.17 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.18 per unit of risk. If you would invest 1,684 in First Commonwealth Financial on August 25, 2024 and sell it today you would earn a total of 237.00 from holding First Commonwealth Financial or generate 14.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Commonwealth Financial vs. ST Bancorp
Performance |
| Timeline |
| First Commonwealth |
| ST Bancorp |
First Commonwealth and ST Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Commonwealth and ST Bancorp
The main advantage of trading using opposite First Commonwealth and ST Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth position performs unexpectedly, ST Bancorp 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 ST Bancorp will offset losses from the drop in ST Bancorp's long position.| First Commonwealth vs. Great Southern Bancorp | First Commonwealth vs. Heritage Financial | First Commonwealth vs. Finward Bancorp | First Commonwealth vs. QCR Holdings |
| ST Bancorp vs. CrossFirst Bankshares | ST Bancorp vs. Enterprise Financial Services | ST Bancorp vs. The First Bancshares, | ST Bancorp vs. First Bancorp |
Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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