Correlation Between Home Bancorp and Middlefield Banc
Can any of the company-specific risk be diversified away by investing in both Home Bancorp and Middlefield Banc 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 Middlefield Banc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Bancorp and Middlefield Banc, you can compare the effects of market volatilities on Home Bancorp and Middlefield Banc 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 Middlefield Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Bancorp and Middlefield Banc.
Diversification Opportunities for Home Bancorp and Middlefield Banc
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Middlefield is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Middlefield Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlefield Banc 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 Middlefield Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlefield Banc has no effect on the direction of Home Bancorp i.e., Home Bancorp and Middlefield Banc go up and down completely randomly.
Pair Corralation between Home Bancorp and Middlefield Banc
Given the investment horizon of 90 days Home Bancorp is expected to generate 1.21 times less return on investment than Middlefield Banc. But when comparing it to its historical volatility, Home Bancorp is 1.36 times less risky than Middlefield Banc. It trades about 0.13 of its potential returns per unit of risk. Middlefield Banc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,535 in Middlefield Banc on September 5, 2024 and sell it today you would earn a total of 544.00 from holding Middlefield Banc or generate 21.46% 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. Middlefield Banc
Performance |
Timeline |
Home Bancorp |
Middlefield Banc |
Home Bancorp and Middlefield Banc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Bancorp and Middlefield Banc
The main advantage of trading using opposite Home Bancorp and Middlefield Banc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Bancorp position performs unexpectedly, Middlefield Banc 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 Middlefield Banc will offset losses from the drop in Middlefield Banc's long position.Home Bancorp vs. Finward Bancorp | Home Bancorp vs. Aquagold International | Home Bancorp vs. Thrivent High Yield | Home Bancorp vs. Morningstar Unconstrained Allocation |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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