Correlation Between US Bancorp and First Horizon
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and First Horizon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and First Horizon, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of First Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and First Horizon.
Diversification Opportunities for US Bancorp and First Horizon
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between USB-PQ and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon and US Bancorp 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 US 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 US Bancorp i.e., US Bancorp and First Horizon go up and down completely randomly.
Pair Corralation between US Bancorp and First Horizon
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.3 times less return on investment than First Horizon. But when comparing it to its historical volatility, US Bancorp is 1.45 times less risky than First Horizon. It trades about 0.03 of its potential returns per unit of risk. First Horizon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,192 in First Horizon on August 29, 2024 and sell it today you would earn a total of 310.00 from holding First Horizon or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. First Horizon
Performance |
| Timeline |
| US Bancorp |
| First Horizon |
US Bancorp and First Horizon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and First Horizon
The main advantage of trading using opposite US Bancorp and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US 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.| First Horizon vs. Truist Financial | First Horizon vs. MetLife Preferred Stock | First Horizon vs. US Bancorp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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