Correlation Between Great Southern and First Guaranty

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

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

Diversification Opportunities for Great Southern and First Guaranty

0.78

Correlation Coefficient

Great Southern  First Guaranty

Poor diversification

The 3 months correlation between Great and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp 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 Great Southern 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 Great Southern Bancorp 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 Great Southern i.e., Great Southern and First Guaranty go up and down completely randomly.

Pair Corralation between Great Southern and First Guaranty

Given the investment horizon of 90 days Great Southern Bancorp is expected to generate 0.43 times more return on investment than First Guaranty. However, Great Southern Bancorp is 2.32 times less risky than First Guaranty. It trades about -0.03 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  5,977  in Great Southern Bancorp on December 28, 2024 and sell it today you would lose (191.00) from holding Great Southern Bancorp or give up 3.2% of portfolio value over 90 days.

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

Great Southern Bancorp  vs.  First Guaranty Bancshares

Great Southern Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Southern Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Great Southern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Great Southern and First Guaranty

The main advantage of trading using opposite Great Southern and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Southern 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 Great Southern Bancorp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.