Correlation Between HomeTrust Bancshares and Veritex Holdings

Can any of the company-specific risk be diversified away by investing in both HomeTrust Bancshares and Veritex 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 Veritex 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 Veritex Holdings, you can compare the effects of market volatilities on HomeTrust Bancshares and Veritex 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 Veritex Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeTrust Bancshares and Veritex Holdings.

Diversification Opportunities for HomeTrust Bancshares and Veritex Holdings

0.9

Correlation Coefficient

HomeTrust Bancshares  Veritex Holdings

Almost no diversification

The 3 months correlation between HomeTrust and Veritex is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and Veritex Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veritex 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 Veritex Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veritex Holdings has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and Veritex Holdings go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and Veritex Holdings

Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 0.73 times more return on investment than Veritex Holdings. However, HomeTrust Bancshares is 1.37 times less risky than Veritex Holdings. It trades about -0.35 of its potential returns per unit of risk. Veritex Holdings is currently generating about -0.26 per unit of risk. If you would invest  3,827  in HomeTrust Bancshares on September 24, 2024 and sell it today you would lose (415.00) from holding HomeTrust Bancshares or give up 10.84% 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.  Veritex Holdings

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.

Veritex Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Veritex Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HomeTrust Bancshares and Veritex Holdings

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

The idea behind HomeTrust Bancshares and Veritex 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.