Correlation Between Axos Financial and First Guaranty

Can any of the company-specific risk be diversified away by investing in both Axos 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 Axos 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 Axos Financial and First Guaranty Bancshares, you can compare the effects of market volatilities on Axos 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 Axos Financial with a short position of First Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and First Guaranty.

Diversification Opportunities for Axos Financial and First Guaranty

0.9

Correlation Coefficient

Axos Financial  First Guaranty

Almost no diversification

The 3 months correlation between Axos and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Axos 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 Axos 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 Axos 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 Axos Financial i.e., Axos Financial and First Guaranty go up and down completely randomly.

Pair Corralation between Axos Financial and First Guaranty

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 0.49 times more return on investment than First Guaranty. However, Axos Financial is 2.05 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 -0.17 per unit of risk. If you would invest  7,129  in Axos Financial on December 27, 2024 and sell it today you would lose (577.00) from holding Axos Financial or give up 8.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Axos Financial  vs.  First Guaranty Bancshares

Axos Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Guaranty Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Guaranty Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Axos Financial and First Guaranty

The main advantage of trading using opposite Axos Financial and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axos 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 Axos 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.