Correlation Between Home Bancorp and Commerzbank

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

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

Diversification Opportunities for Home Bancorp and Commerzbank

-0.71

Correlation Coefficient

Home Bancorp  Commerzbank

Pay attention - limited upside

The 3 months correlation between Home and Commerzbank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Commerzbank AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG PK 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG PK has no effect on the direction of Home Bancorp i.e., Home Bancorp and Commerzbank go up and down completely randomly.

Pair Corralation between Home Bancorp and Commerzbank

Given the investment horizon of 90 days Home Bancorp is expected to generate 1.1 times more return on investment than Commerzbank. However, Home Bancorp is 1.1 times more volatile than Commerzbank AG PK. It trades about -0.1 of its potential returns per unit of risk. Commerzbank AG PK is currently generating about -0.14 per unit of risk. If you would invest  4,843  in Home Bancorp on September 20, 2024 and sell it today you would lose (206.00) from holding Home Bancorp or give up 4.25% of portfolio value over 90 days.

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

Home Bancorp  vs.  Commerzbank AG PK

Home Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commerzbank AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers 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 Commerzbank

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

The idea behind Home Bancorp and Commerzbank AG PK 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.