Correlation Between First Horizon and PNC Financial

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

Diversification Opportunities for First Horizon and PNC Financial

0.88

Correlation Coefficient

First Horizon  PNC Financial

Very poor diversification

The 3 months correlation between First and PNC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial Services has no effect on the direction of First Horizon i.e., First Horizon and PNC Financial go up and down completely randomly.

Pair Corralation between First Horizon and PNC Financial

Considering the 90-day investment horizon First Horizon National is expected to generate 1.31 times more return on investment than PNC Financial. However, First Horizon is 1.31 times more volatile than PNC Financial Services. It trades about -0.02 of its potential returns per unit of risk. PNC Financial Services is currently generating about -0.09 per unit of risk. If you would invest  2,035  in First Horizon National on December 26, 2024 and sell it today you would lose (77.00) from holding First Horizon National or give up 3.78% of portfolio value over 90 days.

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

First Horizon National  vs.  PNC Financial Services

First Horizon National

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Horizon National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, First Horizon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with First Horizon and PNC Financial

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

The idea behind First Horizon National and PNC Financial Services 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.