Correlation Between Citizens Financial and First Guaranty

Can any of the company-specific risk be diversified away by investing in both Citizens Financial and First Guaranty 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 Citizens Financial and First Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citizens Financial Group and First Guaranty Bancshares, you can compare the effects of market volatilities on Citizens Financial and First Guaranty 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 Citizens Financial with a short position of First Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and First Guaranty.

Diversification Opportunities for Citizens Financial and First Guaranty

-0.46

Correlation Coefficient

Citizens Financial  First Guaranty

Very good diversification

The 3 months correlation between Citizens and First is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares and Citizens Financial 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 Citizens Financial Group are associated (or correlated) with First Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Citizens Financial i.e., Citizens Financial and First Guaranty go up and down completely randomly.

Pair Corralation between Citizens Financial and First Guaranty

Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the First Guaranty. But the preferred stock apears to be less risky and, when comparing its historical volatility, Citizens Financial Group is 1.28 times less risky than First Guaranty. The preferred stock trades about -0.13 of its potential returns per unit of risk. The First Guaranty Bancshares is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,057  in First Guaranty Bancshares on September 13, 2024 and sell it today you would earn a total of  83.00  from holding First Guaranty Bancshares or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citizens Financial Group  vs.  First Guaranty Bancshares

Citizens Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

First Guaranty Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Guaranty Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, First Guaranty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citizens Financial and First Guaranty

The main advantage of trading using opposite Citizens Financial and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial position performs unexpectedly, First Guaranty 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 Guaranty will offset losses from the drop in First Guaranty's long position.

The idea behind Citizens Financial Group and First Guaranty Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.