Correlation Between Home Bancorp and FFW

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

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

Diversification Opportunities for Home Bancorp and FFW

-0.54

Correlation Coefficient

Home Bancorp  FFW

Excellent diversification

The 3 months correlation between Home and FFW is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and FFW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFW Corporation 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 FFW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFW Corporation has no effect on the direction of Home Bancorp i.e., Home Bancorp and FFW go up and down completely randomly.

Pair Corralation between Home Bancorp and FFW

Given the investment horizon of 90 days Home Bancorp is expected to under-perform the FFW. In addition to that, Home Bancorp is 2.1 times more volatile than FFW Corporation. It trades about -0.01 of its total potential returns per unit of risk. FFW Corporation is currently generating about 0.02 per unit of volatility. If you would invest  3,970  in FFW Corporation on December 26, 2024 and sell it today you would earn a total of  30.00  from holding FFW Corporation or generate 0.76% return on investment over 90 days.

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

Home Bancorp  vs.  FFW Corp.

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.

FFW Corporation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FFW Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FFW is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Home Bancorp and FFW

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

The idea behind Home Bancorp and FFW Corporation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.