Correlation Between Home Federal and CF Bankshares

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

Diversification Opportunities for Home Federal and CF Bankshares

-0.48

Correlation Coefficient

Home Federal  CF Bankshares

Very good diversification

The 3 months correlation between Home and CFBK is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Home Federal i.e., Home Federal and CF Bankshares go up and down completely randomly.

Pair Corralation between Home Federal and CF Bankshares

Given the investment horizon of 90 days Home Federal is expected to generate 2.89 times less return on investment than CF Bankshares. In addition to that, Home Federal is 1.43 times more volatile than CF Bankshares. It trades about 0.01 of its total potential returns per unit of risk. CF Bankshares is currently generating about 0.03 per unit of volatility. If you would invest  1,942  in CF Bankshares on December 1, 2024 and sell it today you would earn a total of  443.00  from holding CF Bankshares or generate 22.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.04%
Values	Daily Returns

Home Federal Bancorp  vs.  CF Bankshares

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 fragile fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CF Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Home Federal and CF Bankshares

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

The idea behind Home Federal Bancorp and CF Bankshares 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.