Correlation Between Lake Shore and Home Bancorp

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

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

Diversification Opportunities for Lake Shore and Home Bancorp

0.54

Correlation Coefficient

Lake Shore  Home Bancorp

Very weak diversification

The 3 months correlation between Lake and Home is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and Lake Shore 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 Lake Shore 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 Lake Shore i.e., Lake Shore and Home Bancorp go up and down completely randomly.

Pair Corralation between Lake Shore and Home Bancorp

Given the investment horizon of 90 days Lake Shore Bancorp is expected to under-perform the Home Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Lake Shore Bancorp is 1.52 times less risky than Home Bancorp. The stock trades about -0.02 of its potential returns per unit of risk. The Home Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,640  in Home Bancorp on September 2, 2024 and sell it today you would earn a total of  433.00  from holding Home Bancorp or generate 9.33% return on investment over 90 days.

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

Lake Shore Bancorp  vs.  Home Bancorp

Lake Shore Bancorp

Risk-Adjusted Performance

5 of 100

Modest

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

Home Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Shore and Home Bancorp

The main advantage of trading using opposite Lake Shore and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore 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 Lake Shore 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.