Correlation Between First Horizon and CullenFrost Bankers
Can any of the company-specific risk be diversified away by investing in both First Horizon and CullenFrost Bankers 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 CullenFrost Bankers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Horizon and CullenFrost Bankers, you can compare the effects of market volatilities on First Horizon and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and CullenFrost Bankers.
Diversification Opportunities for First Horizon and CullenFrost Bankers
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and CullenFrost is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 are associated (or correlated) with CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of First Horizon i.e., First Horizon and CullenFrost Bankers go up and down completely randomly.
Pair Corralation between First Horizon and CullenFrost Bankers
Assuming the 90 days trading horizon First Horizon is expected to generate 1.5 times more return on investment than CullenFrost Bankers. However, First Horizon is 1.5 times more volatile than CullenFrost Bankers. It trades about 0.02 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.03 per unit of risk. If you would invest 2,165 in First Horizon on September 14, 2024 and sell it today you would earn a total of 235.00 from holding First Horizon or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Horizon vs. CullenFrost Bankers
Performance |
| Timeline |
| First Horizon |
| CullenFrost Bankers |
First Horizon and CullenFrost Bankers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Horizon and CullenFrost Bankers
The main advantage of trading using opposite First Horizon and CullenFrost Bankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon position performs unexpectedly, CullenFrost Bankers 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 CullenFrost Bankers will offset losses from the drop in CullenFrost Bankers' long position.| First Horizon vs. First Horizon | First Horizon vs. First Horizon | First Horizon vs. Citizens Financial Group | First Horizon vs. Customers Bancorp |
| CullenFrost Bankers vs. Morgan Stanley | CullenFrost Bankers vs. KeyCorp | CullenFrost Bankers vs. KeyCorp | CullenFrost Bankers vs. KeyCorp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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