Correlation Between Independent Bank and First Guaranty

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

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

Diversification Opportunities for Independent Bank and First Guaranty

0.76

Correlation Coefficient

Independent Bank  First Guaranty

Poor diversification

The 3 months correlation between Independent and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank Group 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 Independent Bank 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 Independent Bank Group 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 Independent Bank i.e., Independent Bank and First Guaranty go up and down completely randomly.

Pair Corralation between Independent Bank and First Guaranty

Given the investment horizon of 90 days Independent Bank is expected to generate 1.68 times less return on investment than First Guaranty. In addition to that, Independent Bank is 1.39 times more volatile than First Guaranty Bancshares. It trades about 0.11 of its total potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.26 per unit of volatility. If you would invest  999.00  in First Guaranty Bancshares on August 31, 2024 and sell it today you would earn a total of  351.00  from holding First Guaranty Bancshares or generate 35.14% return on investment over 90 days.

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

Independent Bank Group  vs.  First Guaranty Bancshares

Independent Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Independent Bank Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Independent Bank showed solid returns over the last few months and may actually be approaching a breakup point.

First Guaranty Bancshares

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Guaranty Bancshares are ranked lower than 20 (%) 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.

Pair Trading with Independent Bank and First Guaranty

The main advantage of trading using opposite Independent Bank and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank 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 Independent Bank Group 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.