Correlation Between Home Federal and Wingstop

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

Diversification Opportunities for Home Federal and Wingstop

-0.34

Correlation Coefficient

Home Federal  Wingstop

Very good diversification

The 3 months correlation between Home and Wingstop is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of Home Federal i.e., Home Federal and Wingstop go up and down completely randomly.

Pair Corralation between Home Federal and Wingstop

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 1.02 times more return on investment than Wingstop. However, Home Federal is 1.02 times more volatile than Wingstop. It trades about 0.03 of its potential returns per unit of risk. Wingstop is currently generating about -0.05 per unit of risk. If you would invest  1,248  in Home Federal Bancorp on October 7, 2024 and sell it today you would earn a total of  26.00  from holding Home Federal Bancorp or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Home Federal Bancorp  vs.  Wingstop

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.

Wingstop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Home Federal and Wingstop

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

The idea behind Home Federal Bancorp and Wingstop 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.