Correlation Between Carter Bank and Home Bancorp

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

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

Diversification Opportunities for Carter Bank and Home Bancorp

0.81

Correlation Coefficient

Carter Bank  Home Bancorp

Very poor diversification

The 3 months correlation between Carter and Home is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Carter Bank and and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and Carter 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 Carter Bank and are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Carter Bank i.e., Carter Bank and Home Bancorp go up and down completely randomly.

Pair Corralation between Carter Bank and Home Bancorp

Given the investment horizon of 90 days Carter Bank and is expected to generate 0.95 times more return on investment than Home Bancorp. However, Carter Bank and is 1.05 times less risky than Home Bancorp. It trades about -0.27 of its potential returns per unit of risk. Home Bancorp is currently generating about -0.26 per unit of risk. If you would invest  1,887  in Carter Bank and on October 10, 2024 and sell it today you would lose (186.00) from holding Carter Bank and or give up 9.86% of portfolio value over 90 days.

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

Carter Bank and  vs.  Home Bancorp

Carter Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carter Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Carter Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Home Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Carter Bank and Home Bancorp

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

The idea behind Carter Bank and and Home 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.