Correlation Between First Horizon and Eurobank Ergasias

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

By analyzing existing cross correlation between First Horizon and Eurobank Ergasias SA, you can compare the effects of market volatilities on First Horizon and Eurobank Ergasias 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 Horizon with a short position of Eurobank Ergasias. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and Eurobank Ergasias.

Diversification Opportunities for First Horizon and Eurobank Ergasias

0.85

Correlation Coefficient

First Horizon  Eurobank Ergasias

Very poor diversification

The 3 months correlation between First and Eurobank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon and Eurobank Ergasias SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurobank Ergasias and First Horizon 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 Horizon are associated (or correlated) with Eurobank Ergasias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurobank Ergasias has no effect on the direction of First Horizon i.e., First Horizon and Eurobank Ergasias go up and down completely randomly.

Pair Corralation between First Horizon and Eurobank Ergasias

Assuming the 90 days trading horizon First Horizon is expected to generate 12.45 times less return on investment than Eurobank Ergasias. But when comparing it to its historical volatility, First Horizon is 16.89 times less risky than Eurobank Ergasias. It trades about 0.19 of its potential returns per unit of risk. Eurobank Ergasias SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  109.00  in Eurobank Ergasias SA on December 30, 2024 and sell it today you would earn a total of  32.00  from holding Eurobank Ergasias SA or generate 29.36% return on investment over 90 days.

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

First Horizon  vs.  Eurobank Ergasias SA

First Horizon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eurobank Ergasias

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eurobank Ergasias SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Eurobank Ergasias showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Horizon and Eurobank Ergasias

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

The idea behind First Horizon and Eurobank Ergasias SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.