Correlation Between First Horizon and Shore Bancshares

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

Diversification Opportunities for First Horizon and Shore Bancshares

0.07

Correlation Coefficient

First Horizon  Shore Bancshares

Significant diversification

The 3 months correlation between First and Shore is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore 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 Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of First Horizon i.e., First Horizon and Shore Bancshares go up and down completely randomly.

Pair Corralation between First Horizon and Shore Bancshares

Considering the 90-day investment horizon First Horizon National is expected to generate 1.28 times more return on investment than Shore Bancshares. However, First Horizon is 1.28 times more volatile than Shore Bancshares. It trades about 0.03 of its potential returns per unit of risk. Shore Bancshares is currently generating about 0.01 per unit of risk. If you would invest  1,847  in First Horizon National on November 29, 2024 and sell it today you would earn a total of  273.00  from holding First Horizon National or generate 14.78% return on investment over 90 days.

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

First Horizon National  vs.  Shore Bancshares

First Horizon National

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shore Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shore Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Horizon and Shore Bancshares

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

The idea behind First Horizon National and Shore 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.