Correlation Between HomeTrust Bancshares and First Bancorp

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

By analyzing existing cross correlation between HomeTrust Bancshares and First Bancorp, you can compare the effects of market volatilities on HomeTrust Bancshares and First Bancorp 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 First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeTrust Bancshares and First Bancorp.

Diversification Opportunities for HomeTrust Bancshares and First Bancorp

0.91

Correlation Coefficient

HomeTrust Bancshares  First Bancorp

Almost no diversification

The 3 months correlation between HomeTrust and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and First Bancorp go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and First Bancorp

Given the investment horizon of 90 days HomeTrust Bancshares is expected to under-perform the First Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, HomeTrust Bancshares is 1.2 times less risky than First Bancorp. The stock trades about -0.36 of its potential returns per unit of risk. The First Bancorp is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,936  in First Bancorp on September 24, 2024 and sell it today you would lose (165.00) from holding First Bancorp or give up 5.62% of portfolio value over 90 days.

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

HomeTrust Bancshares  vs.  First Bancorp

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.

First Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with HomeTrust Bancshares and First Bancorp

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

The idea behind HomeTrust Bancshares and First Bancorp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.