Correlation Between Ames National and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Ames National and Home Bancorp 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 Ames National and Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ames National and Home Bancorp, you can compare the effects of market volatilities on Ames National and Home Bancorp 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 Ames National with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ames National and Home Bancorp.
Diversification Opportunities for Ames National and Home Bancorp
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ames and Home is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ames National and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and Ames National 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 Ames National are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Ames National i.e., Ames National and Home Bancorp go up and down completely randomly.
Pair Corralation between Ames National and Home Bancorp
Given the investment horizon of 90 days Ames National is expected to under-perform the Home Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Ames National is 1.16 times less risky than Home Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The Home Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,749 in Home Bancorp on August 31, 2024 and sell it today you would earn a total of 1,324 from holding Home Bancorp or generate 35.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ames National vs. Home Bancorp
Performance |
| Timeline |
| Ames National |
| Home Bancorp |
Ames National and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ames National and Home Bancorp
The main advantage of trading using opposite Ames National and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ames National position performs unexpectedly, Home Bancorp 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 Bancorp will offset losses from the drop in Home Bancorp's long position.| Ames National vs. First Community | Ames National vs. Old Point Financial | Ames National vs. Oak Valley Bancorp | Ames National vs. Chemung Financial Corp |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp vs. First Capital |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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