Correlation Between First Financial and First Guaranty
Can any of the company-specific risk be diversified away by investing in both First Financial and First Guaranty 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 Financial and First Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bancorp and First Guaranty Bancshares, you can compare the effects of market volatilities on First Financial and First Guaranty 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 Financial with a short position of First Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and First Guaranty.
Diversification Opportunities for First Financial and First Guaranty
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares and First 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 First Financial Bancorp are associated (or correlated) with First Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of First Financial i.e., First Financial and First Guaranty go up and down completely randomly.
Pair Corralation between First Financial and First Guaranty
Given the investment horizon of 90 days First Financial is expected to generate 1.89 times less return on investment than First Guaranty. In addition to that, First Financial is 1.63 times more volatile than First Guaranty Bancshares. It trades about 0.19 of its total potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.59 per unit of volatility. If you would invest 1,035 in First Guaranty Bancshares on August 31, 2024 and sell it today you would earn a total of 315.00 from holding First Guaranty Bancshares or generate 30.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bancorp vs. First Guaranty Bancshares
Performance |
| Timeline |
| First Financial Bancorp |
| First Guaranty Bancshares |
First Financial and First Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and First Guaranty
The main advantage of trading using opposite First Financial and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, First Guaranty 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 Guaranty will offset losses from the drop in First Guaranty's long position.| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
| First Guaranty vs. Community West Bancshares | First Guaranty vs. First Northwest Bancorp | First Guaranty vs. First Financial Northwest | First Guaranty vs. Great Southern 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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