Correlation Between Home Federal and Citizens Community

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

Diversification Opportunities for Home Federal and Citizens Community

-0.37

Correlation Coefficient

Home Federal  Citizens Community

Very good diversification

The 3 months correlation between Home and Citizens is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Citizens Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Community 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 Citizens Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Community has no effect on the direction of Home Federal i.e., Home Federal and Citizens Community go up and down completely randomly.

Pair Corralation between Home Federal and Citizens Community

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 1.76 times more return on investment than Citizens Community. However, Home Federal is 1.76 times more volatile than Citizens Community Bancorp. It trades about 0.06 of its potential returns per unit of risk. Citizens Community Bancorp is currently generating about -0.12 per unit of risk. If you would invest  1,242  in Home Federal Bancorp on December 29, 2024 and sell it today you would earn a total of  66.00  from holding Home Federal Bancorp or generate 5.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.69%
Values	Daily Returns

Home Federal Bancorp  vs.  Citizens Community Bancorp

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

Citizens Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Community Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Home Federal and Citizens Community

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

The idea behind Home Federal Bancorp and Citizens Community Bancorp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.