Correlation Between HomeTrust Bancshares and Bank Ozk

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

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

Diversification Opportunities for HomeTrust Bancshares and Bank Ozk

0.88

Correlation Coefficient

HomeTrust Bancshares  Bank Ozk

Very poor diversification

The 3 months correlation between HomeTrust and Bank is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Bank Ozk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk 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 Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Bank Ozk go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Bank Ozk

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 1.01 times more return on investment than Bank Ozk. However, HomeTrust Bancshares is 1.01 times more volatile than Bank Ozk. It trades about 0.07 of its potential returns per unit of risk. Bank Ozk is currently generating about 0.06 per unit of risk. If you would invest  2,862  in HomeTrust Bancshares on September 25, 2024 and sell it today you would earn a total of  541.00  from holding HomeTrust Bancshares or generate 18.9% return on investment over 90 days.

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

HomeTrust Bancshares  vs.  Bank Ozk

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.

Bank Ozk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Bank Ozk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HomeTrust Bancshares and Bank Ozk

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

The idea behind HomeTrust Bancshares and Bank Ozk 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.