Correlation Between First Guaranty and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both First Guaranty and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp PR, you can compare the effects of market volatilities on First Guaranty and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and Merchants Bancorp.
Diversification Opportunities for First Guaranty and Merchants Bancorp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Merchants is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of First Guaranty i.e., First Guaranty and Merchants Bancorp go up and down completely randomly.
Pair Corralation between First Guaranty and Merchants Bancorp
If you would invest 2,078 in First Guaranty Bancshares on September 14, 2024 and sell it today you would earn a total of 46.00 from holding First Guaranty Bancshares or generate 2.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 1.59% |
Values | Daily Returns |
First Guaranty Bancshares vs. Merchants Bancorp PR
Performance |
Timeline |
First Guaranty Bancshares |
Merchants Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Guaranty and Merchants Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Guaranty and Merchants Bancorp
The main advantage of trading using opposite First Guaranty and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.First Guaranty vs. Capital One Financial | First Guaranty vs. Capital One Financial | First Guaranty vs. Bank of America |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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