Correlation Between HomeTrust Bancshares and Community Bank

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

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

Diversification Opportunities for HomeTrust Bancshares and Community Bank

0.92

Correlation Coefficient

HomeTrust Bancshares  Community Bank

Almost no diversification

The 3 months correlation between HomeTrust and Community is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System and HomeTrust Bancshares 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 HomeTrust Bancshares are associated (or correlated) with Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Community Bank go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Community Bank

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 0.96 times more return on investment than Community Bank. However, HomeTrust Bancshares is 1.05 times less risky than Community Bank. It trades about 0.05 of its potential returns per unit of risk. Community Bank System is currently generating about 0.02 per unit of risk. If you would invest  2,305  in HomeTrust Bancshares on September 23, 2024 and sell it today you would earn a total of  1,107  from holding HomeTrust Bancshares or generate 48.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

HomeTrust Bancshares  vs.  Community Bank System

HomeTrust Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeTrust Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Community Bank System

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bank System are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HomeTrust Bancshares and Community Bank

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

The idea behind HomeTrust Bancshares and Community Bank System 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.