Correlation Between Home Bancorp and Information Services

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

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

Diversification Opportunities for Home Bancorp and Information Services

-0.2

Correlation Coefficient

Home Bancorp  Information Services

Good diversification

The 3 months correlation between Home and Information is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Information Services Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Home Bancorp i.e., Home Bancorp and Information Services go up and down completely randomly.

Pair Corralation between Home Bancorp and Information Services

Given the investment horizon of 90 days Home Bancorp is expected to under-perform the Information Services. But the stock apears to be less risky and, when comparing its historical volatility, Home Bancorp is 1.57 times less risky than Information Services. The stock trades about -0.1 of its potential returns per unit of risk. The Information Services Group is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  303.00  in Information Services Group on December 29, 2024 and sell it today you would earn a total of  97.00  from holding Information Services Group or generate 32.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Home Bancorp  vs.  Information Services Group

Home Bancorp

Risk-Adjusted Performance

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.

Information Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Bancorp and Information Services

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

The idea behind Home Bancorp and Information Services Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..