Correlation Between Home Federal and First Horizon

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

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

Diversification Opportunities for Home Federal and First Horizon

0.23

Correlation Coefficient

Home Federal  First Horizon

Modest diversification

The 3 months correlation between Home and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and First Horizon National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon National and Home Federal 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 Home Federal 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 National has no effect on the direction of Home Federal i.e., Home Federal and First Horizon go up and down completely randomly.

Pair Corralation between Home Federal and First Horizon

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 37.69 times more return on investment than First Horizon. However, Home Federal is 37.69 times more volatile than First Horizon National. It trades about 0.08 of its potential returns per unit of risk. First Horizon National is currently generating about 0.11 per unit of risk. If you would invest  1,099  in Home Federal Bancorp on October 13, 2024 and sell it today you would earn a total of  161.00  from holding Home Federal Bancorp or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Home Federal Bancorp  vs.  First Horizon National

Home Federal Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Horizon National

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 11 (%) 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.

Pair Trading with Home Federal and First Horizon

The main advantage of trading using opposite Home Federal and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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 Home Federal Bancorp and First Horizon National 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.