Correlation Between CrossFirst Bankshares and First Commonwealth

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

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

Diversification Opportunities for CrossFirst Bankshares and First Commonwealth

0.69

Correlation Coefficient

CrossFirst Bankshares  First Commonwealth

Poor diversification

The 3 months correlation between CrossFirst and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth and CrossFirst Bankshares 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 CrossFirst Bankshares 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 CrossFirst Bankshares i.e., CrossFirst Bankshares and First Commonwealth go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and First Commonwealth

Considering the 90-day investment horizon CrossFirst Bankshares is expected to under-perform the First Commonwealth. But the stock apears to be less risky and, when comparing its historical volatility, CrossFirst Bankshares is 1.06 times less risky than First Commonwealth. The stock trades about 0.0 of its potential returns per unit of risk. The First Commonwealth Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,703  in First Commonwealth Financial on September 2, 2024 and sell it today you would earn a total of  180.00  from holding First Commonwealth Financial or generate 10.57% return on investment over 90 days.

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

CrossFirst Bankshares  vs.  First Commonwealth Financial

CrossFirst Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, CrossFirst Bankshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Commonwealth

Risk-Adjusted Performance

5 of 100

Modest

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 unsteady fundamental indicators, First Commonwealth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CrossFirst Bankshares and First Commonwealth

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

The idea behind CrossFirst Bankshares and First Commonwealth Financial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.