Correlation Between Home Bancorp and IF Bancorp

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

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

Diversification Opportunities for Home Bancorp and IF Bancorp

0.74

Correlation Coefficient

Home Bancorp  IF Bancorp

Poor diversification

The 3 months correlation between Home and IROQ is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp 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 IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Home Bancorp i.e., Home Bancorp and IF Bancorp go up and down completely randomly.

Pair Corralation between Home Bancorp and IF Bancorp

Given the investment horizon of 90 days Home Bancorp is expected to under-perform the IF Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Home Bancorp is 1.17 times less risky than IF Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The IF Bancorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,106  in IF Bancorp on September 20, 2024 and sell it today you would earn a total of  176.00  from holding IF Bancorp or generate 8.36% return on investment over 90 days.

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

Home Bancorp  vs.  IF Bancorp

Home Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 3 (%) 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.

IF Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Bancorp and IF Bancorp

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

The idea behind Home Bancorp and IF Bancorp 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 Global Correlations module to find global opportunities by holding instruments from different markets.