Correlation Between IF Bancorp and Home Bancorp

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

By analyzing existing cross correlation between IF Bancorp and Home Bancorp, you can compare the effects of market volatilities on IF Bancorp and Home 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 IF Bancorp with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of IF Bancorp and Home Bancorp.

Diversification Opportunities for IF Bancorp and Home Bancorp

0.74

Correlation Coefficient

IF Bancorp  Home Bancorp

Poor diversification

The 3 months correlation between IROQ and Home is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding IF Bancorp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and IF Bancorp 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 IF Bancorp are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of IF Bancorp i.e., IF Bancorp and Home Bancorp go up and down completely randomly.

Pair Corralation between IF Bancorp and Home Bancorp

Given the investment horizon of 90 days IF Bancorp is expected to generate 0.96 times more return on investment than Home Bancorp. However, IF Bancorp is 1.04 times less risky than Home Bancorp. It trades about 0.05 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.03 per unit of risk. If you would invest  1,644  in IF Bancorp on September 20, 2024 and sell it today you would earn a total of  681.00  from holding IF Bancorp or generate 41.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.54%
Values	Daily Returns

IF Bancorp  vs.  Home Bancorp

IF Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Home Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IF Bancorp and Home Bancorp

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

The idea behind IF Bancorp and Home 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.