Correlation Between CRA International and Home Bancorp

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

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

Diversification Opportunities for CRA International and Home Bancorp

0.49

Correlation Coefficient

CRA International  Home Bancorp

Very weak diversification

The 3 months correlation between CRA and Home is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and CRA International 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 CRA International 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 CRA International i.e., CRA International and Home Bancorp go up and down completely randomly.

Pair Corralation between CRA International and Home Bancorp

Given the investment horizon of 90 days CRA International is expected to under-perform the Home Bancorp. In addition to that, CRA International is 1.35 times more volatile than Home Bancorp. It trades about -0.02 of its total potential returns per unit of risk. Home Bancorp is currently generating about 0.01 per unit of volatility. If you would invest  4,589  in Home Bancorp on December 27, 2024 and sell it today you would earn a total of  17.00  from holding Home Bancorp or generate 0.37% return on investment over 90 days.

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

CRA International  vs.  Home Bancorp

CRA International

Risk-Adjusted Performance

Very Weak

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

Home Bancorp

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite CRA International and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International 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 CRA International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.