Correlation Between Home Federal and Hilltop Holdings

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

Diversification Opportunities for Home Federal and Hilltop Holdings

0.49

Correlation Coefficient

Home Federal  Hilltop Holdings

Very weak diversification

The 3 months correlation between Home and Hilltop is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings 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 Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of Home Federal i.e., Home Federal and Hilltop Holdings go up and down completely randomly.

Pair Corralation between Home Federal and Hilltop Holdings

Given the investment horizon of 90 days Home Federal is expected to generate 1.15 times less return on investment than Hilltop Holdings. In addition to that, Home Federal is 1.75 times more volatile than Hilltop Holdings. It trades about 0.06 of its total potential returns per unit of risk. Hilltop Holdings is currently generating about 0.11 per unit of volatility. If you would invest  2,831  in Hilltop Holdings on December 28, 2024 and sell it today you would earn a total of  271.00  from holding Hilltop Holdings or generate 9.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.33%
Values	Daily Returns

Home Federal Bancorp  vs.  Hilltop Holdings

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.

Hilltop Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilltop Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Hilltop Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Home Federal and Hilltop Holdings

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

The idea behind Home Federal Bancorp and Hilltop Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.