Correlation Between Home Federal and Arteris

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

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

Diversification Opportunities for Home Federal and Arteris

0.4

Correlation Coefficient

Home Federal  Arteris

Very weak diversification

The 3 months correlation between Home and Arteris is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Arteris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arteris and Home Federal 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 Federal Bancorp are associated (or correlated) with Arteris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arteris has no effect on the direction of Home Federal i.e., Home Federal and Arteris go up and down completely randomly.

Pair Corralation between Home Federal and Arteris

Given the investment horizon of 90 days Home Federal is expected to generate 13.01 times less return on investment than Arteris. But when comparing it to its historical volatility, Home Federal Bancorp is 1.97 times less risky than Arteris. It trades about 0.03 of its potential returns per unit of risk. Arteris is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  717.00  in Arteris on October 7, 2024 and sell it today you would earn a total of  508.00  from holding Arteris or generate 70.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Home Federal Bancorp  vs.  Arteris

Home Federal Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Arteris

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Arteris reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Arteris

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

The idea behind Home Federal Bancorp and Arteris 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.