Correlation Between First Guaranty and First Financial
Can any of the company-specific risk be diversified away by investing in both First Guaranty and First Financial 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 Guaranty and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Guaranty Bancshares and First Financial Bancorp, you can compare the effects of market volatilities on First Guaranty and First Financial 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 Guaranty with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and First Financial.
Diversification Opportunities for First Guaranty and First Financial
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 Guaranty Bancshares and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and First Guaranty 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 Guaranty Bancshares are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of First Guaranty i.e., First Guaranty and First Financial go up and down completely randomly.
Pair Corralation between First Guaranty and First Financial
Given the investment horizon of 90 days First Guaranty Bancshares is expected to generate 0.61 times more return on investment than First Financial. However, First Guaranty Bancshares is 1.63 times less risky than First Financial. It trades about 0.59 of its potential returns per unit of risk. First Financial Bancorp is currently generating about 0.19 per unit of risk. 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 Guaranty Bancshares vs. First Financial Bancorp
Performance |
| Timeline |
| First Guaranty Bancshares |
| First Financial Bancorp |
First Guaranty and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Guaranty and First Financial
The main advantage of trading using opposite First Guaranty and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, First Financial 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 Financial will offset losses from the drop in First Financial's long position.| First Guaranty vs. Community West Bancshares | First Guaranty vs. First Northwest Bancorp | First Guaranty vs. First Financial Northwest | First Guaranty vs. Great Southern Bancorp |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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