Correlation Between First Guaranty and FS Bancorp

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Can any of the company-specific risk be diversified away by investing in both First Guaranty and FS Bancorp 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 Guaranty and FS Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Guaranty Bancshares and FS Bancorp, you can compare the effects of market volatilities on First Guaranty and FS Bancorp 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 Guaranty with a short position of FS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Guaranty and FS Bancorp.

Diversification Opportunities for First Guaranty and FS Bancorp

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between First and FSBW is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Guaranty Bancshares and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp and First Guaranty 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 Guaranty Bancshares are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of First Guaranty i.e., First Guaranty and FS Bancorp go up and down completely randomly.

Pair Corralation between First Guaranty and FS Bancorp

Given the investment horizon of 90 days First Guaranty Bancshares is expected to generate 0.91 times more return on investment than FS Bancorp. However, First Guaranty Bancshares is 1.09 times less risky than FS Bancorp. It trades about 0.17 of its potential returns per unit of risk. FS Bancorp is currently generating about 0.02 per unit of risk. If you would invest  1,042  in First Guaranty Bancshares on September 18, 2024 and sell it today you would earn a total of  255.00  from holding First Guaranty Bancshares or generate 24.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.44%
ValuesDaily Returns

First Guaranty Bancshares  vs.  FS Bancorp

 Performance 
       Timeline  
First Guaranty Bancshares 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in First Guaranty Bancshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, First Guaranty demonstrated solid returns over the last few months and may actually be approaching a breakup point.
FS Bancorp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in FS Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, FS Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Guaranty and FS Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Guaranty and FS Bancorp

The main advantage of trading using opposite First Guaranty and FS Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Guaranty position performs unexpectedly, FS Bancorp 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 FS Bancorp will offset losses from the drop in FS Bancorp's long position.
The idea behind First Guaranty Bancshares and FS Bancorp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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