Correlation Between Lake Shore and HomeTrust Bancshares

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

Diversification Opportunities for Lake Shore and HomeTrust Bancshares

0.08

Correlation Coefficient

Lake Shore  HomeTrust Bancshares

Significant diversification

The 3 months correlation between Lake and HomeTrust is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares 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 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 Lake Shore i.e., Lake Shore and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Lake Shore and HomeTrust Bancshares

Given the investment horizon of 90 days Lake Shore Bancorp is expected to generate 0.76 times more return on investment than HomeTrust Bancshares. However, Lake Shore Bancorp is 1.32 times less risky than HomeTrust Bancshares. It trades about 0.07 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.04 per unit of risk. If you would invest  1,263  in Lake Shore Bancorp on September 2, 2024 and sell it today you would earn a total of  83.00  from holding Lake Shore Bancorp or generate 6.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Lake Shore Bancorp  vs.  HomeTrust Bancshares

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.

HomeTrust Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Lake Shore and HomeTrust Bancshares

The main advantage of trading using opposite Lake Shore and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore 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 Lake Shore 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.