Correlation Between Home Bancorp and Axos Financial

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

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

Diversification Opportunities for Home Bancorp and Axos Financial

0.53

Correlation Coefficient

Home Bancorp  Axos Financial

Very weak diversification

The 3 months correlation between Home and Axos is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and Home Bancorp 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 Home Bancorp are associated (or correlated) with Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of Home Bancorp i.e., Home Bancorp and Axos Financial go up and down completely randomly.

Pair Corralation between Home Bancorp and Axos Financial

Given the investment horizon of 90 days Home Bancorp is expected to generate 1.04 times more return on investment than Axos Financial. However, Home Bancorp is 1.04 times more volatile than Axos Financial. It trades about 0.0 of its potential returns per unit of risk. Axos Financial is currently generating about -0.09 per unit of risk. If you would invest  4,655  in Home Bancorp on December 26, 2024 and sell it today you would lose (49.00) from holding Home Bancorp or give up 1.05% of portfolio value over 90 days.

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

Home Bancorp  vs.  Axos Financial

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.

Axos Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Home Bancorp and Axos Financial

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

The idea behind Home Bancorp and Axos Financial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.