Correlation Between First Horizon and CullenFrost Bankers

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

By analyzing existing cross correlation between First Horizon and CullenFrost Bankers, you can compare the effects of market volatilities on First Horizon and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and CullenFrost Bankers.

Diversification Opportunities for First Horizon and CullenFrost Bankers

0.89

Correlation Coefficient

First Horizon  CullenFrost Bankers

Very poor diversification

The 3 months correlation between First and CullenFrost is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of First Horizon i.e., First Horizon and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between First Horizon and CullenFrost Bankers

Assuming the 90 days trading horizon First Horizon is expected to generate 2.01 times less return on investment than CullenFrost Bankers. In addition to that, First Horizon is 1.08 times more volatile than CullenFrost Bankers. It trades about 0.08 of its total potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.17 per unit of volatility. If you would invest  1,761  in CullenFrost Bankers on October 26, 2024 and sell it today you would earn a total of  69.00  from holding CullenFrost Bankers or generate 3.92% 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.  CullenFrost Bankers

First Horizon

Risk-Adjusted Performance

0 of 100

Very Weak

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

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First Horizon and CullenFrost Bankers

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

The idea behind First Horizon and CullenFrost Bankers 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.