Correlation Between Home Bancorp and CrossFirst Bankshares

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

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

Diversification Opportunities for Home Bancorp and CrossFirst Bankshares

-0.8

Correlation Coefficient

Home Bancorp  CrossFirst Bankshares

Pay attention - limited upside

The 3 months correlation between Home and CrossFirst is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares 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 CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Home Bancorp i.e., Home Bancorp and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Home Bancorp and CrossFirst Bankshares

Given the investment horizon of 90 days Home Bancorp is expected to generate 3.45 times less return on investment than CrossFirst Bankshares. But when comparing it to its historical volatility, Home Bancorp is 1.05 times less risky than CrossFirst Bankshares. It trades about 0.02 of its potential returns per unit of risk. CrossFirst Bankshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,522  in CrossFirst Bankshares on December 29, 2024 and sell it today you would earn a total of  77.00  from holding CrossFirst Bankshares or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	68.85%
Values	Daily Returns

Home Bancorp  vs.  CrossFirst Bankshares

Home Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CrossFirst Bankshares

Risk-Adjusted Performance

Modest

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady technical and fundamental indicators, CrossFirst Bankshares may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Home Bancorp and CrossFirst Bankshares

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

The idea behind Home Bancorp and CrossFirst Bankshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.