Correlation Between Mid Penn and Home BancShares
Can any of the company-specific risk be diversified away by investing in both Mid Penn and Home 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 Mid Penn and Home BancShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Penn Bancorp and Home BancShares, you can compare the effects of market volatilities on Mid Penn and Home 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 Mid Penn with a short position of Home BancShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Penn and Home BancShares.
Diversification Opportunities for Mid Penn and Home BancShares
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and Home is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares and Mid Penn 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 Mid Penn Bancorp are associated (or correlated) with Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of Mid Penn i.e., Mid Penn and Home BancShares go up and down completely randomly.
Pair Corralation between Mid Penn and Home BancShares
Considering the 90-day investment horizon Mid Penn Bancorp is expected to under-perform the Home BancShares. But the stock apears to be less risky and, when comparing its historical volatility, Mid Penn Bancorp is 1.33 times less risky than Home BancShares. The stock trades about -0.03 of its potential returns per unit of risk. The Home BancShares is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,670 in Home BancShares on October 25, 2024 and sell it today you would earn a total of 346.50 from holding Home BancShares or generate 12.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Mid Penn Bancorp vs. Home BancShares
Performance |
Timeline |
Mid Penn Bancorp |
Home BancShares |
Mid Penn and Home BancShares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mid Penn and Home BancShares
The main advantage of trading using opposite Mid Penn and Home BancShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Penn position performs unexpectedly, Home 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 Home BancShares will offset losses from the drop in Home BancShares' long position.Mid Penn vs. Affinity Bancshares | Mid Penn vs. Home Federal Bancorp | Mid Penn vs. Franklin Financial Services | Mid Penn vs. ACNB Corporation |
Home BancShares vs. Community West Bancshares | Home BancShares vs. First Financial Northwest | Home BancShares vs. First Northwest Bancorp | Home BancShares vs. First Capital |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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