Correlation Between Home Federal and TC Bancshares

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

Diversification Opportunities for Home Federal and TC Bancshares

0.04

Correlation Coefficient

Home Federal  TC Bancshares

Significant diversification

The 3 months correlation between Home and TCBC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and TC Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC 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 TC Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Bancshares has no effect on the direction of Home Federal i.e., Home Federal and TC Bancshares go up and down completely randomly.

Pair Corralation between Home Federal and TC Bancshares

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 28.49 times more return on investment than TC Bancshares. However, Home Federal is 28.49 times more volatile than TC Bancshares. It trades about 0.04 of its potential returns per unit of risk. TC Bancshares is currently generating about -0.01 per unit of risk. If you would invest  1,592  in Home Federal Bancorp on September 18, 2024 and sell it today you would lose (337.00) from holding Home Federal Bancorp or give up 21.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Home Federal Bancorp  vs.  TC Bancshares

Home Federal Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 1 (%) 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.

TC Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TC Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TC Bancshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Home Federal and TC Bancshares

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

The idea behind Home Federal Bancorp and TC Bancshares 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.