Correlation Between IF Bancorp and HomeTrust Bancshares

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

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

Diversification Opportunities for IF Bancorp and HomeTrust Bancshares

0.47

Correlation Coefficient

IF Bancorp  HomeTrust Bancshares

Very weak diversification

The 3 months correlation between IROQ and HomeTrust is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding IF Bancorp and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares 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 HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of IF Bancorp i.e., IF Bancorp and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between IF Bancorp and HomeTrust Bancshares

Given the investment horizon of 90 days IF Bancorp is expected to generate 1.82 times more return on investment than HomeTrust Bancshares. However, IF Bancorp is 1.82 times more volatile than HomeTrust Bancshares. It trades about 0.17 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about -0.36 per unit of risk. If you would invest  2,100  in IF Bancorp on September 25, 2024 and sell it today you would earn a total of  200.00  from holding IF Bancorp or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

IF Bancorp  vs.  HomeTrust Bancshares

IF Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 11 (%) 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.

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.

Pair Trading with IF Bancorp and HomeTrust Bancshares

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

The idea behind IF Bancorp and HomeTrust Bancshares 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.