Correlation Between Hanmi Financial and HomeTrust Bancshares

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

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

Diversification Opportunities for Hanmi Financial and HomeTrust Bancshares

0.88

Correlation Coefficient

Hanmi Financial  HomeTrust Bancshares

Very poor diversification

The 3 months correlation between Hanmi and HomeTrust is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hanmi Financial and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and Hanmi 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 Hanmi Financial are associated (or correlated) with HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of Hanmi Financial i.e., Hanmi Financial and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Hanmi Financial and HomeTrust Bancshares

Given the investment horizon of 90 days Hanmi Financial is expected to generate 1.18 times more return on investment than HomeTrust Bancshares. However, Hanmi Financial is 1.18 times more volatile than HomeTrust Bancshares. It trades about 0.17 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.03 per unit of risk. If you would invest  1,783  in Hanmi Financial on October 1, 2024 and sell it today you would earn a total of  555.00  from holding Hanmi Financial or generate 31.13% return on investment over 90 days.

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

Hanmi Financial  vs.  HomeTrust Bancshares

Hanmi Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanmi Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Hanmi Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

HomeTrust Bancshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hanmi Financial and HomeTrust Bancshares

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

The idea behind Hanmi Financial and HomeTrust Bancshares 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.