Correlation Between First Guaranty and Texas Capital
Can any of the company-specific risk be diversified away by investing in both First Guaranty and Texas Capital 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 Texas Capital 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 Texas Capital Bancshares, you can compare the effects of market volatilities on First Guaranty and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and Texas Capital.
Diversification Opportunities for First Guaranty and Texas Capital
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Texas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of First Guaranty i.e., First Guaranty and Texas Capital go up and down completely randomly.
Pair Corralation between First Guaranty and Texas Capital
Given the investment horizon of 90 days First Guaranty Bancshares is expected to under-perform the Texas Capital. But the stock apears to be less risky and, when comparing its historical volatility, First Guaranty Bancshares is 1.26 times less risky than Texas Capital. The stock trades about -0.08 of its potential returns per unit of risk. The Texas Capital Bancshares is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 7,664 in Texas Capital Bancshares on November 9, 2024 and sell it today you would earn a total of 688.00 from holding Texas Capital Bancshares or generate 8.98% 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. Texas Capital Bancshares
Performance |
| Timeline |
| First Guaranty Bancshares |
| Texas Capital Bancshares |
First Guaranty and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Guaranty and Texas Capital
The main advantage of trading using opposite First Guaranty and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital'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 |
| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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