Correlation Between ChoiceOne Financial and Home Federal

Can any of the company-specific risk be diversified away by investing in both ChoiceOne 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 ChoiceOne 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 ChoiceOne Financial Services and Home Federal Bancorp, you can compare the effects of market volatilities on ChoiceOne 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 ChoiceOne Financial with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChoiceOne Financial and Home Federal.

Diversification Opportunities for ChoiceOne Financial and Home Federal

0.13

Correlation Coefficient

ChoiceOne Financial  Home Federal

Average diversification

The 3 months correlation between ChoiceOne and Home is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ChoiceOne Financial Services 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 ChoiceOne 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 ChoiceOne Financial Services 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 ChoiceOne Financial i.e., ChoiceOne Financial and Home Federal go up and down completely randomly.

Pair Corralation between ChoiceOne Financial and Home Federal

Given the investment horizon of 90 days ChoiceOne Financial Services is expected to generate 0.87 times more return on investment than Home Federal. However, ChoiceOne Financial Services is 1.15 times less risky than Home Federal. It trades about 0.31 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.03 per unit of risk. If you would invest  3,260  in ChoiceOne Financial Services on September 4, 2024 and sell it today you would earn a total of  444.00  from holding ChoiceOne Financial Services or generate 13.62% return on investment over 90 days.

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

ChoiceOne Financial Services  vs.  Home Federal Bancorp

ChoiceOne Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChoiceOne Financial Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, ChoiceOne Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Home Federal Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Home Federal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChoiceOne Financial and Home Federal

The main advantage of trading using opposite ChoiceOne Financial and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChoiceOne 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 ChoiceOne Financial Services 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.