Correlation Between First Guaranty and First Merchants
Can any of the company-specific risk be diversified away by investing in both First Guaranty and First Merchants 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 Merchants 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 Merchants, you can compare the effects of market volatilities on First Guaranty and First Merchants 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 Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and First Merchants.
Diversification Opportunities for First Guaranty and First Merchants
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and First is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants 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 Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of First Guaranty i.e., First Guaranty and First Merchants go up and down completely randomly.
Pair Corralation between First Guaranty and First Merchants
Assuming the 90 days horizon First Guaranty Bancshares is expected to generate 2.63 times more return on investment than First Merchants. However, First Guaranty is 2.63 times more volatile than First Merchants. It trades about 0.05 of its potential returns per unit of risk. First Merchants is currently generating about 0.07 per unit of risk. If you would invest 1,740 in First Guaranty Bancshares on November 9, 2024 and sell it today you would earn a total of 387.00 from holding First Guaranty Bancshares or generate 22.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Guaranty Bancshares vs. First Merchants
Performance |
| Timeline |
| First Guaranty Bancshares |
| First Merchants |
First Guaranty and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Guaranty and First Merchants
The main advantage of trading using opposite First Guaranty and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, First Merchants 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 Merchants will offset losses from the drop in First Merchants' long position.| First Guaranty vs. CNB Financial | First Guaranty vs. First Citizens BancShares | First Guaranty vs. Texas Capital Bancshares | First Guaranty vs. Merchants Bancorp |
| First Merchants vs. Heartland Financial USA | First Merchants vs. OceanFirst Financial Corp | First Merchants vs. Old National Bancorp | First Merchants vs. Old National 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |