Correlation Between CNB Financial and Home Federal

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

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

Diversification Opportunities for CNB Financial and Home Federal

-0.2

Correlation Coefficient

CNB Financial  Home Federal

Good diversification

The 3 months correlation between CNB and Home is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CNB Financial 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 CNB Financial 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 CNB Financial 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 CNB Financial i.e., CNB Financial and Home Federal go up and down completely randomly.

Pair Corralation between CNB Financial and Home Federal

Given the investment horizon of 90 days CNB Financial is expected to under-perform the Home Federal. But the stock apears to be less risky and, when comparing its historical volatility, CNB Financial is 1.77 times less risky than Home Federal. The stock trades about -0.17 of its potential returns per unit of risk. The Home Federal Bancorp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,301  in Home Federal Bancorp on December 17, 2024 and sell it today you would lose (70.00) from holding Home Federal Bancorp or give up 5.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.67%
Values	Daily Returns

CNB Financial  vs.  Home Federal Bancorp

CNB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Home Federal Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 CNB Financial and Home Federal

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