Correlation Between First Business and Home Federal
Can any of the company-specific risk be diversified away by investing in both First Business 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 Business 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 Business Financial and Home Federal Bancorp, you can compare the effects of market volatilities on First Business 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 Business with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Home Federal.
Diversification Opportunities for First Business and Home Federal
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Home is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Business 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 Business 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 Business 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 Business i.e., First Business and Home Federal go up and down completely randomly.
Pair Corralation between First Business and Home Federal
Given the investment horizon of 90 days First Business Financial is expected to generate 0.52 times more return on investment than Home Federal. However, First Business Financial is 1.94 times less risky than Home Federal. It trades about 0.7 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.01 per unit of risk. If you would invest 4,438 in First Business Financial on November 9, 2024 and sell it today you would earn a total of 1,197 from holding First Business Financial or generate 26.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.0% |
| Values | Daily Returns |
First Business Financial vs. Home Federal Bancorp
Performance |
| Timeline |
| First Business Financial |
| Home Federal Bancorp |
First Business and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Home Federal
The main advantage of trading using opposite First Business and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business 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.| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |