Correlation Between ST Bancorp and First Commonwealth
Can any of the company-specific risk be diversified away by investing in both ST Bancorp and First Commonwealth 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 ST Bancorp and First Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ST Bancorp and First Commonwealth Financial, you can compare the effects of market volatilities on ST Bancorp and First Commonwealth 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 ST Bancorp with a short position of First Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of ST Bancorp and First Commonwealth.
Diversification Opportunities for ST Bancorp and First Commonwealth
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STBA and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth and ST Bancorp 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 ST Bancorp are associated (or correlated) with First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of ST Bancorp i.e., ST Bancorp and First Commonwealth go up and down completely randomly.
Pair Corralation between ST Bancorp and First Commonwealth
Given the investment horizon of 90 days ST Bancorp is expected to generate 1.05 times less return on investment than First Commonwealth. But when comparing it to its historical volatility, ST Bancorp is 1.13 times less risky than First Commonwealth. It trades about 0.18 of its potential returns per unit of risk. First Commonwealth Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,684 in First Commonwealth Financial on August 25, 2024 and sell it today you would earn a total of 237.00 from holding First Commonwealth Financial or generate 14.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ST Bancorp vs. First Commonwealth Financial
Performance |
| Timeline |
| ST Bancorp |
| First Commonwealth |
ST Bancorp and First Commonwealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ST Bancorp and First Commonwealth
The main advantage of trading using opposite ST Bancorp and First Commonwealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ST Bancorp position performs unexpectedly, First Commonwealth 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 Commonwealth will offset losses from the drop in First Commonwealth's long position.| ST Bancorp vs. CrossFirst Bankshares | ST Bancorp vs. Enterprise Financial Services | ST Bancorp vs. The First Bancshares, | ST Bancorp vs. First Bancorp |
| First Commonwealth vs. Great Southern Bancorp | First Commonwealth vs. Heritage Financial | First Commonwealth vs. Finward Bancorp | First Commonwealth vs. QCR Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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