Correlation Between Regions Financial and Horizon Bancorp

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

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

Diversification Opportunities for Regions Financial and Horizon Bancorp

0.76

Correlation Coefficient

Regions Financial  Horizon Bancorp

Poor diversification

The 3 months correlation between Regions and Horizon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Horizon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Bancorp and Regions Financial 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 Regions Financial are associated (or correlated) with Horizon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Bancorp has no effect on the direction of Regions Financial i.e., Regions Financial and Horizon Bancorp go up and down completely randomly.

Pair Corralation between Regions Financial and Horizon Bancorp

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Horizon Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.18 times less risky than Horizon Bancorp. The stock trades about -0.16 of its potential returns per unit of risk. The Horizon Bancorp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,811  in Horizon Bancorp on November 29, 2024 and sell it today you would lose (154.50) from holding Horizon Bancorp or give up 8.53% of portfolio value over 90 days.

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

Regions Financial  vs.  Horizon Bancorp

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Horizon Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Horizon Bancorp 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 Regions Financial and Horizon Bancorp

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

The idea behind Regions Financial and Horizon Bancorp 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.