Correlation Between First Commonwealth and First Guaranty

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

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

Diversification Opportunities for First Commonwealth and First Guaranty

0.08

Correlation Coefficient

First Commonwealth  First Guaranty

Significant diversification

The 3 months correlation between First and First is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial 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 First Commonwealth 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 Commonwealth Financial 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 First Commonwealth i.e., First Commonwealth and First Guaranty go up and down completely randomly.

Pair Corralation between First Commonwealth and First Guaranty

Considering the 90-day investment horizon First Commonwealth Financial is expected to generate 0.58 times more return on investment than First Guaranty. However, First Commonwealth Financial is 1.73 times less risky than First Guaranty. It trades about 0.07 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about -0.06 per unit of risk. If you would invest  1,593  in First Commonwealth Financial on May 20, 2025 and sell it today you would earn a total of  86.00  from holding First Commonwealth Financial or generate 5.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

First Commonwealth Financial  vs.  First Guaranty Bancshares

First Commonwealth

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in First Commonwealth Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, First Commonwealth is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Guaranty Bancshares

Risk-Adjusted Performance

Weakest

Over the last 90 days First Guaranty Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Commonwealth and First Guaranty

The main advantage of trading using opposite First Commonwealth and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth 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 First Commonwealth Financial 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.