Correlation Between Home Federal and Dutch Bros

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

Diversification Opportunities for Home Federal and Dutch Bros

0.23

Correlation Coefficient

Home Federal  Dutch Bros

Modest diversification

The 3 months correlation between Home and Dutch is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros 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 Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of Home Federal i.e., Home Federal and Dutch Bros go up and down completely randomly.

Pair Corralation between Home Federal and Dutch Bros

Given the investment horizon of 90 days Home Federal is expected to generate 16.38 times less return on investment than Dutch Bros. But when comparing it to its historical volatility, Home Federal Bancorp is 2.13 times less risky than Dutch Bros. It trades about 0.03 of its potential returns per unit of risk. Dutch Bros is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,494  in Dutch Bros on October 7, 2024 and sell it today you would earn a total of  2,141  from holding Dutch Bros or generate 61.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Home Federal Bancorp  vs.  Dutch Bros

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.

Dutch Bros

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Dutch Bros unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Dutch Bros

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

The idea behind Home Federal Bancorp and Dutch Bros 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 Transaction History module to view history of all your transactions and understand their impact on performance.