Correlation Between Sandy Spring and Home BancShares

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

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

Diversification Opportunities for Sandy Spring and Home BancShares

0.54

Correlation Coefficient

Sandy Spring  Home BancShares

Very weak diversification

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

Pair Corralation between Sandy Spring and Home BancShares

Given the investment horizon of 90 days Sandy Spring Bancorp is expected to under-perform the Home BancShares. In addition to that, Sandy Spring is 1.31 times more volatile than Home BancShares. It trades about -0.13 of its total potential returns per unit of risk. Home BancShares is currently generating about 0.03 per unit of volatility. If you would invest  2,823  in Home BancShares on December 27, 2024 and sell it today you would earn a total of  47.00  from holding Home BancShares or generate 1.66% return on investment over 90 days.

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

Sandy Spring Bancorp  vs.  Home BancShares

Sandy Spring Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sandy Spring Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Home BancShares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home BancShares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home BancShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sandy Spring and Home BancShares

The main advantage of trading using opposite Sandy Spring and Home BancShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandy Spring 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.

The idea behind Sandy Spring Bancorp and Home 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.