Correlation Between First Commonwealth and Fulton Financial

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

Diversification Opportunities for First Commonwealth and Fulton Financial

0.75

Correlation Coefficient

First Commonwealth  Fulton Financial

Poor diversification

The 3 months correlation between First and Fulton is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and Fulton Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulton Financial 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 Fulton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulton Financial has no effect on the direction of First Commonwealth i.e., First Commonwealth and Fulton Financial go up and down completely randomly.

Pair Corralation between First Commonwealth and Fulton Financial

Considering the 90-day investment horizon First Commonwealth Financial is expected to under-perform the Fulton Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Commonwealth Financial is 1.14 times less risky than Fulton Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Fulton Financial is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,928  in Fulton Financial on December 28, 2024 and sell it today you would lose (102.00) from holding Fulton Financial or give up 5.29% of portfolio value over 90 days.

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

First Commonwealth Financial  vs.  Fulton Financial

First Commonwealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Commonwealth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, First Commonwealth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Fulton Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fulton Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Fulton Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Commonwealth and Fulton Financial

The main advantage of trading using opposite First Commonwealth and Fulton Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth position performs unexpectedly, Fulton Financial 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 Fulton Financial will offset losses from the drop in Fulton Financial's long position.

The idea behind First Commonwealth Financial and Fulton 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.