Correlation Between First Horizon and PIMCO 1

Can any of the company-specific risk be diversified away by investing in both First Horizon and PIMCO 1 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 PIMCO 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Horizon National and PIMCO 1 5 Year, you can compare the effects of market volatilities on First Horizon and PIMCO 1 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 PIMCO 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and PIMCO 1.

Diversification Opportunities for First Horizon and PIMCO 1

0.68

Correlation Coefficient

First Horizon  PIMCO 1

Poor diversification

The 3 months correlation between First and PIMCO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and PIMCO 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 1 5 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 National are associated (or correlated) with PIMCO 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 1 5 has no effect on the direction of First Horizon i.e., First Horizon and PIMCO 1 go up and down completely randomly.

Pair Corralation between First Horizon and PIMCO 1

Considering the 90-day investment horizon First Horizon National is expected to under-perform the PIMCO 1. In addition to that, First Horizon is 9.8 times more volatile than PIMCO 1 5 Year. It trades about -0.02 of its total potential returns per unit of risk. PIMCO 1 5 Year is currently generating about 0.01 per unit of volatility. If you would invest  5,086  in PIMCO 1 5 Year on January 17, 2024 and sell it today you would earn a total of  42.00  from holding PIMCO 1 5 Year or generate 0.83% return on investment over 90 days.

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

First Horizon National  vs.  PIMCO 1 5 Year

First Horizon National

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, First Horizon may actually be approaching a critical reversion point that can send shares even higher in May 2024.

PIMCO 1 5

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 1 5 Year are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Horizon and PIMCO 1

The main advantage of trading using opposite First Horizon and PIMCO 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon position performs unexpectedly, PIMCO 1 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 PIMCO 1 will offset losses from the drop in PIMCO 1's long position.

The idea behind First Horizon National and PIMCO 1 5 Year 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.