Correlation Between William Penn and HomeTrust Bancshares

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

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

Diversification Opportunities for William Penn and HomeTrust Bancshares

0.76

Correlation Coefficient

William Penn  HomeTrust Bancshares

Poor diversification

The 3 months correlation between William and HomeTrust is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and William 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 William Penn Bancorp 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 William Penn i.e., William Penn and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between William Penn and HomeTrust Bancshares

Given the investment horizon of 90 days William Penn is expected to generate 1.07 times less return on investment than HomeTrust Bancshares. But when comparing it to its historical volatility, William Penn Bancorp is 1.63 times less risky than HomeTrust Bancshares. It trades about 0.01 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,425  in HomeTrust Bancshares on September 25, 2024 and sell it today you would lose (13.00) from holding HomeTrust Bancshares or give up 0.38% of portfolio value over 90 days.

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

William Penn Bancorp  vs.  HomeTrust Bancshares

William Penn Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in William Penn Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, William Penn is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 William Penn and HomeTrust Bancshares

The main advantage of trading using opposite William Penn and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn 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 William Penn Bancorp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.