Correlation Between First Horizon and First Citizens

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

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

Diversification Opportunities for First Horizon and First Citizens

0.93

Correlation Coefficient

First Horizon  First Citizens

Almost no diversification

The 3 months correlation between First and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and First Citizens BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens BancShares 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 National are associated (or correlated) with First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens BancShares has no effect on the direction of First Horizon i.e., First Horizon and First Citizens go up and down completely randomly.

Pair Corralation between First Horizon and First Citizens

Considering the 90-day investment horizon First Horizon National is expected to generate 0.84 times more return on investment than First Citizens. However, First Horizon National is 1.19 times less risky than First Citizens. It trades about 0.18 of its potential returns per unit of risk. First Citizens BancShares is currently generating about 0.08 per unit of risk. If you would invest  1,558  in First Horizon National on September 5, 2024 and sell it today you would earn a total of  504.00  from holding First Horizon National or generate 32.35% return on investment over 90 days.

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

First Horizon National  vs.  First Citizens BancShares

First Horizon National

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical indicators, First Horizon displayed solid returns over the last few months and may actually be approaching a breakup point.

First Citizens BancShares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Citizens BancShares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, First Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Horizon and First Citizens

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

The idea behind First Horizon National and First Citizens 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.