Correlation Between First Commonwealth and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both First Commonwealth 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 First Commonwealth and Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Commonwealth Financial and Home Bancorp, you can compare the effects of market volatilities on First Commonwealth 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 First Commonwealth with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Commonwealth and Home Bancorp.
Diversification Opportunities for First Commonwealth and Home Bancorp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Home is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and First Commonwealth 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 First Commonwealth Financial 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 First Commonwealth i.e., First Commonwealth and Home Bancorp go up and down completely randomly.
Pair Corralation between First Commonwealth and Home Bancorp
Considering the 90-day investment horizon First Commonwealth is expected to generate 1.35 times less return on investment than Home Bancorp. In addition to that, First Commonwealth is 1.23 times more volatile than Home Bancorp. It trades about 0.1 of its total potential returns per unit of risk. Home Bancorp is currently generating about 0.16 per unit of volatility. If you would invest 4,107 in Home Bancorp on September 6, 2024 and sell it today you would earn a total of 906.00 from holding Home Bancorp or generate 22.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
First Commonwealth Financial vs. Home Bancorp
Performance |
Timeline |
First Commonwealth |
Home Bancorp |
First Commonwealth and Home Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Commonwealth and Home Bancorp
The main advantage of trading using opposite First Commonwealth and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth 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.First Commonwealth vs. Great Southern Bancorp | First Commonwealth vs. Heritage Financial | First Commonwealth vs. Finward Bancorp | First Commonwealth vs. QCR Holdings |
Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp vs. First Capital |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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