Correlation Between Veritex Holdings and First Horizon

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

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

Diversification Opportunities for Veritex Holdings and First Horizon

-0.62

Correlation Coefficient

Veritex Holdings  First Horizon

Excellent diversification

The 3 months correlation between Veritex and First is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon and Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings i.e., Veritex Holdings and First Horizon go up and down completely randomly.

Pair Corralation between Veritex Holdings and First Horizon

Given the investment horizon of 90 days Veritex Holdings is expected to generate 1.42 times less return on investment than First Horizon. In addition to that, Veritex Holdings is 1.29 times more volatile than First Horizon. It trades about 0.01 of its total potential returns per unit of risk. First Horizon is currently generating about 0.02 per unit of volatility. If you would invest  2,192  in First Horizon on October 11, 2024 and sell it today you would earn a total of  249.00  from holding First Horizon or generate 11.36% return on investment over 90 days.

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

Veritex Holdings  vs.  First Horizon

Veritex Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veritex Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Veritex Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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. In spite of rather sound basic indicators, First Horizon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Veritex Holdings and First Horizon

The main advantage of trading using opposite Veritex Holdings and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veritex Holdings 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 Veritex Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.