Correlation Between Home Federal and FNCB Bancorp

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

Diversification Opportunities for Home Federal and FNCB Bancorp

0.0

Correlation Coefficient

Home Federal  FNCB Bancorp

Pay attention - limited upside

The 3 months correlation between Home and FNCB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and FNCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNCB Bancorp 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 FNCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNCB Bancorp has no effect on the direction of Home Federal i.e., Home Federal and FNCB Bancorp go up and down completely randomly.

Pair Corralation between Home Federal and FNCB Bancorp

If you would invest  1,240  in Home Federal Bancorp on October 11, 2024 and sell it today you would earn a total of  49.00  from holding Home Federal Bancorp or generate 3.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Home Federal Bancorp  vs.  FNCB Bancorp

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.

FNCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, FNCB Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Federal and FNCB Bancorp

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

The idea behind Home Federal Bancorp and FNCB 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.