Correlation Between 1st Source and Home Federal

Can any of the company-specific risk be diversified away by investing in both 1st Source and Home Federal 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 1st Source and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Source and Home Federal Bancorp, you can compare the effects of market volatilities on 1st Source and Home Federal 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 1st Source with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Source and Home Federal.

Diversification Opportunities for 1st Source and Home Federal

-0.14

Correlation Coefficient

1st Source  Home Federal

Good diversification

The 3 months correlation between 1st and Home is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding 1st Source and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and 1st Source 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 1st Source are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of 1st Source i.e., 1st Source and Home Federal go up and down completely randomly.

Pair Corralation between 1st Source and Home Federal

Given the investment horizon of 90 days 1st Source is expected to generate 0.82 times more return on investment than Home Federal. However, 1st Source is 1.22 times less risky than Home Federal. It trades about 0.0 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.05 per unit of risk. If you would invest  5,992  in 1st Source on September 20, 2024 and sell it today you would lose (75.00) from holding 1st Source or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

1st Source  vs.  Home Federal Bancorp

1st Source

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days 1st Source has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, 1st Source is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with 1st Source and Home Federal

The main advantage of trading using opposite 1st Source and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Source position performs unexpectedly, Home Federal 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 Federal will offset losses from the drop in Home Federal's long position.

The idea behind 1st Source and Home Federal 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 CEOs Directory module to screen CEOs from public companies around the world.