Correlation Between Provident Financial and HomeTrust Bancshares

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

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

Diversification Opportunities for Provident Financial and HomeTrust Bancshares

0.97

Correlation Coefficient

Provident Financial  HomeTrust Bancshares

Almost no diversification

The 3 months correlation between Provident and HomeTrust is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and Provident Financial 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 Provident Financial Services 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 Provident Financial i.e., Provident Financial and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Provident Financial and HomeTrust Bancshares

Considering the 90-day investment horizon Provident Financial is expected to generate 31.56 times less return on investment than HomeTrust Bancshares. In addition to that, Provident Financial is 1.04 times more volatile than HomeTrust Bancshares. It trades about 0.0 of its total potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.04 per unit of volatility. If you would invest  2,322  in HomeTrust Bancshares on October 13, 2024 and sell it today you would earn a total of  838.00  from holding HomeTrust Bancshares or generate 36.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Provident Financial Services  vs.  HomeTrust Bancshares

Provident Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Provident Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Provident Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 Provident Financial and HomeTrust Bancshares

The main advantage of trading using opposite Provident Financial and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial 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 Provident Financial Services 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.