Correlation Between First Horizon and First Financial

Can any of the company-specific risk be diversified away by investing in both First Horizon and First Financial 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 Financial 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 Financial Northwest, you can compare the effects of market volatilities on First Horizon and First Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and First Financial.

Diversification Opportunities for First Horizon and First Financial

-0.53

Correlation Coefficient

First Horizon  First Financial

Excellent diversification

The 3 months correlation between First and First is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of First Horizon i.e., First Horizon and First Financial go up and down completely randomly.

Pair Corralation between First Horizon and First Financial

Considering the 90-day investment horizon First Horizon National is expected to generate 1.23 times more return on investment than First Financial. However, First Horizon is 1.23 times more volatile than First Financial Northwest. It trades about 0.32 of its potential returns per unit of risk. First Financial Northwest is currently generating about -0.05 per unit of risk. If you would invest  1,994  in First Horizon National on October 21, 2024 and sell it today you would earn a total of  162.00  from holding First Horizon National or generate 8.12% return on investment over 90 days.

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

First Horizon National  vs.  First Financial Northwest

First Horizon National

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical indicators, First Horizon displayed solid returns over the last few months and may actually be approaching a breakup point.

First Financial Northwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Northwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with First Horizon and First Financial

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

The idea behind First Horizon National and First Financial Northwest 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.