Correlation Between Home Federal and PT Bank

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

Diversification Opportunities for Home Federal and PT Bank

0.04

Correlation Coefficient

Home Federal  PT Bank

Significant diversification

The 3 months correlation between Home and BKRKF is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Home Federal i.e., Home Federal and PT Bank go up and down completely randomly.

Pair Corralation between Home Federal and PT Bank

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 8.98 times more return on investment than PT Bank. However, Home Federal is 8.98 times more volatile than PT Bank Rakyat. It trades about 0.04 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.01 per unit of risk. If you would invest  1,869  in Home Federal Bancorp on October 3, 2024 and sell it today you would lose (609.00) from holding Home Federal Bancorp or give up 32.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.14%
Values	Daily Returns

Home Federal Bancorp  vs.  PT Bank Rakyat

Home Federal Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Home Federal and PT Bank

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

The idea behind Home Federal Bancorp and PT Bank Rakyat 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.