Correlation Between Home Federal and Bank of the

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

Diversification Opportunities for Home Federal and Bank of the

0.07

Correlation Coefficient

Home Federal  Bank of the

Significant diversification

The 3 months correlation between Home and Bank is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the 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 the. 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 the has no effect on the direction of Home Federal i.e., Home Federal and Bank of the go up and down completely randomly.

Pair Corralation between Home Federal and Bank of the

Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Bank of the. In addition to that, Home Federal is 1.35 times more volatile than Bank of the. It trades about -0.01 of its total potential returns per unit of risk. Bank of the is currently generating about 0.16 per unit of volatility. If you would invest  1,341  in Bank of the on September 12, 2024 and sell it today you would earn a total of  272.00  from holding Bank of the or generate 20.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Home Federal Bancorp  vs.  Bank of the

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 the

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Bank of the revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Bank of the

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

The idea behind Home Federal Bancorp and Bank of the 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.