Correlation Between HomeStreet and Pinnacle Bancshares

Can any of the company-specific risk be diversified away by investing in both HomeStreet and Pinnacle 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 HomeStreet and Pinnacle Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HomeStreet and Pinnacle Bancshares, you can compare the effects of market volatilities on HomeStreet and Pinnacle 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 HomeStreet with a short position of Pinnacle Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeStreet and Pinnacle Bancshares.

Diversification Opportunities for HomeStreet and Pinnacle Bancshares

0.0

Correlation Coefficient

HomeStreet  Pinnacle Bancshares

Pay attention - limited upside

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

Pair Corralation between HomeStreet and Pinnacle Bancshares

Given the investment horizon of 90 days HomeStreet is expected to generate 2.82 times more return on investment than Pinnacle Bancshares. However, HomeStreet is 2.82 times more volatile than Pinnacle Bancshares. It trades about -0.01 of its potential returns per unit of risk. Pinnacle Bancshares is currently generating about -0.07 per unit of risk. If you would invest  2,509  in HomeStreet on September 28, 2024 and sell it today you would lose (1,388) from holding HomeStreet or give up 55.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	8.97%
Values	Daily Returns

HomeStreet  vs.  Pinnacle Bancshares

HomeStreet

Risk-Adjusted Performance

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Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pinnacle Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HomeStreet and Pinnacle Bancshares

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

The idea behind HomeStreet and Pinnacle 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.