Correlation Between First Guaranty and KeyCorp
Can any of the company-specific risk be diversified away by investing in both First Guaranty and KeyCorp 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 KeyCorp 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 KeyCorp, you can compare the effects of market volatilities on First Guaranty and KeyCorp 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 KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and KeyCorp.
Diversification Opportunities for First Guaranty and KeyCorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and KeyCorp is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of First Guaranty i.e., First Guaranty and KeyCorp go up and down completely randomly.
Pair Corralation between First Guaranty and KeyCorp
Assuming the 90 days horizon First Guaranty Bancshares is expected to generate 1.21 times more return on investment than KeyCorp. However, First Guaranty is 1.21 times more volatile than KeyCorp. It trades about 0.2 of its potential returns per unit of risk. KeyCorp is currently generating about -0.01 per unit of risk. If you would invest 1,979 in First Guaranty Bancshares on November 4, 2024 and sell it today you would earn a total of 148.00 from holding First Guaranty Bancshares or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Guaranty Bancshares vs. KeyCorp
Performance |
| Timeline |
| First Guaranty Bancshares |
| KeyCorp |
First Guaranty and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Guaranty and KeyCorp
The main advantage of trading using opposite First Guaranty and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp's long position.| First Guaranty vs. CNB Financial | First Guaranty vs. First Citizens BancShares | First Guaranty vs. Texas Capital Bancshares | First Guaranty vs. Merchants Bancorp |
| KeyCorp vs. Fifth Third Bancorp | KeyCorp vs. Huntington Bancshares Incorporated | KeyCorp vs. Washington Federal | KeyCorp vs. Fifth Third 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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