Correlation Between Federal Agricultural and First Commonwealth

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

By analyzing existing cross correlation between Federal Agricultural Mortgage and First Commonwealth Financial, you can compare the effects of market volatilities on Federal Agricultural and First Commonwealth 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 Federal Agricultural with a short position of First Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and First Commonwealth.

Diversification Opportunities for Federal Agricultural and First Commonwealth

0.78

Correlation Coefficient

Federal Agricultural  First Commonwealth

Poor diversification

The 3 months correlation between Federal and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth and Federal Agricultural 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 Federal Agricultural Mortgage are associated (or correlated) with First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and First Commonwealth go up and down completely randomly.

Pair Corralation between Federal Agricultural and First Commonwealth

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to under-perform the First Commonwealth. In addition to that, Federal Agricultural is 1.05 times more volatile than First Commonwealth Financial. It trades about -0.17 of its total potential returns per unit of risk. First Commonwealth Financial is currently generating about -0.07 per unit of volatility. If you would invest  1,753  in First Commonwealth Financial on August 26, 2025 and sell it today you would lose (142.00) from holding First Commonwealth Financial or give up 8.1% of portfolio value over 90 days.

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

Federal Agricultural Mortgage  vs.  First Commonwealth Financial

Federal Agricultural

Risk-Adjusted Performance

Weakest

Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Commonwealth

Risk-Adjusted Performance

Weakest

Over the last 90 days First Commonwealth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Federal Agricultural and First Commonwealth

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

The idea behind Federal Agricultural Mortgage and First Commonwealth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..