Correlation Between Fifth Third and First Horizon

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

By analyzing existing cross correlation between Fifth Third Bancorp and First Horizon, you can compare the effects of market volatilities on Fifth Third and First Horizon 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 Fifth Third with a short position of First Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and First Horizon.

Diversification Opportunities for Fifth Third and First Horizon

0.53

Correlation Coefficient

Fifth Third  First Horizon

Very weak diversification

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

Pair Corralation between Fifth Third and First Horizon

Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the First Horizon. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fifth Third Bancorp is 1.33 times less risky than First Horizon. The preferred stock trades about -0.35 of its potential returns per unit of risk. The First Horizon is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,989  in First Horizon on October 10, 2024 and sell it today you would lose (197.00) from holding First Horizon or give up 9.9% of portfolio value over 90 days.

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

Fifth Third Bancorp  vs.  First Horizon

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 weak 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.

Pair Trading with Fifth Third and First Horizon

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

The idea behind Fifth Third Bancorp and First Horizon 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.