Correlation Between Home Federal and Huntington Bancshares

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

Diversification Opportunities for Home Federal and Huntington Bancshares

-0.17

Correlation Coefficient

Home Federal  Huntington Bancshares

Good diversification

The 3 months correlation between Home and Huntington is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Huntington Bancshares Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Bancshares 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 Huntington Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Bancshares has no effect on the direction of Home Federal i.e., Home Federal and Huntington Bancshares go up and down completely randomly.

Pair Corralation between Home Federal and Huntington Bancshares

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 1.5 times more return on investment than Huntington Bancshares. However, Home Federal is 1.5 times more volatile than Huntington Bancshares Incorporated. It trades about 0.09 of its potential returns per unit of risk. Huntington Bancshares Incorporated is currently generating about -0.25 per unit of risk. If you would invest  1,240  in Home Federal Bancorp on September 23, 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	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Home Federal Bancorp  vs.  Huntington Bancshares Incorpor

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.

Huntington Bancshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Bancshares Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Huntington Bancshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Huntington Bancshares

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

The idea behind Home Federal Bancorp and Huntington Bancshares Incorporated 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.