Correlation Between MT Bank and First Horizon

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

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

Diversification Opportunities for MT Bank and First Horizon

0.96

Correlation Coefficient

MT Bank  First Horizon

Almost no diversification

The 3 months correlation between MTB and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank 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 MT Bank 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 MT Bank 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 MT Bank i.e., MT Bank and First Horizon go up and down completely randomly.

Pair Corralation between MT Bank and First Horizon

Considering the 90-day investment horizon MT Bank is expected to generate 1.65 times less return on investment than First Horizon. But when comparing it to its historical volatility, MT Bank is 1.3 times less risky than First Horizon. It trades about 0.19 of its potential returns per unit of risk. First Horizon National is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,756  in First Horizon National on August 31, 2024 and sell it today you would earn a total of  353.00  from holding First Horizon National or generate 20.1% return on investment over 90 days.

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

MT Bank  vs.  First Horizon National

MT Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MT Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

First Horizon National

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 13 (%) 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 MT Bank and First Horizon

The main advantage of trading using opposite MT Bank and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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 MT Bank 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.