Correlation Between HomeTrust Bancshares and Old Point

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

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

Diversification Opportunities for HomeTrust Bancshares and Old Point

0.52

Correlation Coefficient

HomeTrust Bancshares  Old Point

Very weak diversification

The 3 months correlation between HomeTrust and Old is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Old Point Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Point Financial 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 Old Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Point Financial has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Old Point go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Old Point

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 0.84 times more return on investment than Old Point. However, HomeTrust Bancshares is 1.2 times less risky than Old Point. It trades about 0.05 of its potential returns per unit of risk. Old Point Financial is currently generating about 0.01 per unit of risk. If you would invest  2,305  in HomeTrust Bancshares on September 24, 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	Weak
Accuracy	99.2%
Values	Daily Returns

HomeTrust Bancshares  vs.  Old Point Financial

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.

Old Point Financial

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeTrust Bancshares and Old Point

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

The idea behind HomeTrust Bancshares and Old Point Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.