Correlation Between Home Federal and Bayfirst Financial

Can any of the company-specific risk be diversified away by investing in both Home Federal and Bayfirst Financial 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 Bayfirst Financial 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 Bayfirst Financial Corp, you can compare the effects of market volatilities on Home Federal and Bayfirst Financial 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 Bayfirst Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Bayfirst Financial.

Diversification Opportunities for Home Federal and Bayfirst Financial

0.52

Correlation Coefficient

Home Federal  Bayfirst Financial

Very weak diversification

The 3 months correlation between Home and Bayfirst is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp 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 Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of Home Federal i.e., Home Federal and Bayfirst Financial go up and down completely randomly.

Pair Corralation between Home Federal and Bayfirst Financial

Given the investment horizon of 90 days Home Federal is expected to generate 3.87 times less return on investment than Bayfirst Financial. But when comparing it to its historical volatility, Home Federal Bancorp is 1.19 times less risky than Bayfirst Financial. It trades about 0.06 of its potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,343  in Bayfirst Financial Corp on December 29, 2024 and sell it today you would earn a total of  472.00  from holding Bayfirst Financial Corp or generate 35.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.69%
Values	Daily Returns

Home Federal Bancorp  vs.  Bayfirst Financial Corp

Home Federal Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bayfirst Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Bayfirst Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Bayfirst Financial

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

The idea behind Home Federal Bancorp and Bayfirst Financial Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.