Correlation Between German American and HomeStreet

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

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

Diversification Opportunities for German American and HomeStreet

0.55

Correlation Coefficient

German American  HomeStreet

Very weak diversification

The 3 months correlation between German and HomeStreet is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding German American Bancorp and HomeStreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeStreet and German American 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 German American Bancorp are associated (or correlated) with HomeStreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeStreet has no effect on the direction of German American i.e., German American and HomeStreet go up and down completely randomly.

Pair Corralation between German American and HomeStreet

Given the investment horizon of 90 days German American Bancorp is expected to generate 0.59 times more return on investment than HomeStreet. However, German American Bancorp is 1.7 times less risky than HomeStreet. It trades about -0.07 of its potential returns per unit of risk. HomeStreet is currently generating about -0.12 per unit of risk. If you would invest  4,025  in German American Bancorp on December 30, 2024 and sell it today you would lose (256.00) from holding German American Bancorp or give up 6.36% of portfolio value over 90 days.

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

German American Bancorp  vs.  HomeStreet

German American Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days German American Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, German American is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

HomeStreet

Risk-Adjusted Performance

Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with German American and HomeStreet

The main advantage of trading using opposite German American and HomeStreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if German American position performs unexpectedly, HomeStreet 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 HomeStreet will offset losses from the drop in HomeStreet's long position.

The idea behind German American Bancorp and HomeStreet 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.