Correlation Between Commerzbank and Home Bancorp

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

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

Diversification Opportunities for Commerzbank and Home Bancorp

-0.71

Correlation Coefficient

Commerzbank  Home Bancorp

Pay attention - limited upside

The 3 months correlation between Commerzbank and Home is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and Commerzbank 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 Commerzbank AG PK 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 Commerzbank i.e., Commerzbank and Home Bancorp go up and down completely randomly.

Pair Corralation between Commerzbank and Home Bancorp

Assuming the 90 days horizon Commerzbank AG PK is expected to generate 1.08 times more return on investment than Home Bancorp. However, Commerzbank is 1.08 times more volatile than Home Bancorp. It trades about 0.06 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.03 per unit of risk. If you would invest  899.00  in Commerzbank AG PK on September 20, 2024 and sell it today you would earn a total of  708.00  from holding Commerzbank AG PK or generate 78.75% return on investment over 90 days.

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

Commerzbank AG PK  vs.  Home Bancorp

Commerzbank AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Home Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Commerzbank and Home Bancorp

The main advantage of trading using opposite Commerzbank and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank 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 Commerzbank AG PK 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.