Correlation Between Dime Community and First Guaranty

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

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

Diversification Opportunities for Dime Community and First Guaranty

0.16

Correlation Coefficient

Dime Community  First Guaranty

Average diversification

The 3 months correlation between Dime and First is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares 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 Dime Community 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 Dime Community Bancshares 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 Dime Community i.e., Dime Community and First Guaranty go up and down completely randomly.

Pair Corralation between Dime Community and First Guaranty

Assuming the 90 days horizon Dime Community Bancshares is expected to generate 0.69 times more return on investment than First Guaranty. However, Dime Community Bancshares is 1.45 times less risky than First Guaranty. It trades about -0.01 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about -0.07 per unit of risk. If you would invest  1,956  in Dime Community Bancshares on December 2, 2024 and sell it today you would lose (24.00) from holding Dime Community Bancshares or give up 1.23% of portfolio value over 90 days.

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

Dime Community Bancshares  vs.  First Guaranty Bancshares

Dime Community Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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. Even with latest weak performance, the Preferred Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Dime Community and First Guaranty

The main advantage of trading using opposite Dime Community and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dime Community 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 Dime Community Bancshares 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.