Correlation Between Home Federal and Bank of Marin

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

Diversification Opportunities for Home Federal and Bank of Marin

0.13

Correlation Coefficient

Home Federal  Bank of Marin

Average diversification

The 3 months correlation between Home and Bank is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin 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 Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Home Federal i.e., Home Federal and Bank of Marin go up and down completely randomly.

Pair Corralation between Home Federal and Bank of Marin

Given the investment horizon of 90 days Home Federal is expected to generate 25.13 times less return on investment than Bank of Marin. But when comparing it to its historical volatility, Home Federal Bancorp is 1.49 times less risky than Bank of Marin. It trades about 0.01 of its potential returns per unit of risk. Bank of Marin is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,159  in Bank of Marin on September 13, 2024 and sell it today you would earn a total of  347.00  from holding Bank of Marin or generate 16.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Home Federal Bancorp  vs.  Bank of Marin

Home Federal Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 1 (%) 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.

Bank of Marin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Marin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of Marin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Bank of Marin

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

The idea behind Home Federal Bancorp and Bank of Marin 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.