Correlation Between First Financial and Home Federal

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Can any of the company-specific risk be diversified away by investing in both First Financial 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 First Financial and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial and Home Federal Bancorp, you can compare the effects of market volatilities on First Financial 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 First Financial with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Home Federal.

Diversification Opportunities for First Financial and Home Federal

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between First and Home is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Financial 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 First 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 First Financial 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 First Financial i.e., First Financial and Home Federal go up and down completely randomly.

Pair Corralation between First Financial and Home Federal

Given the investment horizon of 90 days First Financial is expected to generate 0.77 times more return on investment than Home Federal. However, First Financial is 1.29 times less risky than Home Federal. It trades about 0.08 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.02 per unit of risk. If you would invest  3,631  in First Financial on December 4, 2024 and sell it today you would earn a total of  1,594  from holding First Financial or generate 43.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy89.39%
ValuesDaily Returns

First Financial  vs.  Home Federal Bancorp

 Performance 
       Timeline  
First Financial 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.
Home Federal Bancorp 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

First Financial and Home Federal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Financial and Home Federal

The main advantage of trading using opposite First Financial and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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 First Financial 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.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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