Correlation Between Arteris and Home Federal

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

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

Diversification Opportunities for Arteris and Home Federal

0.5

Correlation Coefficient

Arteris  Home Federal

Very weak diversification

The 3 months correlation between Arteris and Home is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Arteris and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and Arteris 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 Arteris are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Arteris i.e., Arteris and Home Federal go up and down completely randomly.

Pair Corralation between Arteris and Home Federal

Considering the 90-day investment horizon Arteris is expected to generate 1.96 times more return on investment than Home Federal. However, Arteris is 1.96 times more volatile than Home Federal Bancorp. It trades about 0.2 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.02 per unit of risk. If you would invest  978.00  in Arteris on October 22, 2024 and sell it today you would earn a total of  170.00  from holding Arteris or generate 17.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

Arteris  vs.  Home Federal Bancorp

Arteris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Arteris reported solid returns over the last few months and may actually be approaching a breakup point.

Home Federal Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arteris and Home Federal

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

The idea behind Arteris and Home Federal Bancorp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.