Correlation Between BankUnited and HomeTrust Bancshares

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

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

Diversification Opportunities for BankUnited and HomeTrust Bancshares

0.9

Correlation Coefficient

BankUnited  HomeTrust Bancshares

Almost no diversification

The 3 months correlation between BankUnited and HomeTrust is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BankUnited and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and BankUnited 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 BankUnited are associated (or correlated) with HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of BankUnited i.e., BankUnited and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between BankUnited and HomeTrust Bancshares

Considering the 90-day investment horizon BankUnited is expected to generate 1.35 times less return on investment than HomeTrust Bancshares. In addition to that, BankUnited is 1.32 times more volatile than HomeTrust Bancshares. It trades about 0.02 of its total potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.04 per unit of volatility. If you would invest  2,322  in HomeTrust Bancshares on October 13, 2024 and sell it today you would earn a total of  838.00  from holding HomeTrust Bancshares or generate 36.09% return on investment over 90 days.

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

BankUnited  vs.  HomeTrust Bancshares

BankUnited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, BankUnited is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

HomeTrust Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeTrust Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BankUnited and HomeTrust Bancshares

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

The idea behind BankUnited and HomeTrust Bancshares 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.