Correlation Between HomeTrust Bancshares and Hilltop Holdings

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

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

Diversification Opportunities for HomeTrust Bancshares and Hilltop Holdings

0.62

Correlation Coefficient

HomeTrust Bancshares  Hilltop Holdings

Poor diversification

The 3 months correlation between HomeTrust and Hilltop is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings 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 Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Hilltop Holdings go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Hilltop Holdings

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 1.13 times more return on investment than Hilltop Holdings. However, HomeTrust Bancshares is 1.13 times more volatile than Hilltop Holdings. It trades about 0.05 of its potential returns per unit of risk. Hilltop Holdings is currently generating about 0.01 per unit of risk. If you would invest  2,294  in HomeTrust Bancshares on September 26, 2024 and sell it today you would earn a total of  1,119  from holding HomeTrust Bancshares or generate 48.78% return on investment over 90 days.

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

HomeTrust Bancshares  vs.  Hilltop Holdings

HomeTrust Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Hilltop Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hilltop Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with HomeTrust Bancshares and Hilltop Holdings

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

The idea behind HomeTrust Bancshares and Hilltop Holdings 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.