Correlation Between German American and HomeStreet
Can any of the company-specific risk be diversified away by investing in both German American and HomeStreet 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 German American and HomeStreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between German American Bancorp and HomeStreet, you can compare the effects of market volatilities on German American and HomeStreet 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 German American with a short position of HomeStreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of German American and HomeStreet.
Diversification Opportunities for German American and HomeStreet
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between German and HomeStreet is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding German American Bancorp and HomeStreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeStreet and German American 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 German American Bancorp are associated (or correlated) with HomeStreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeStreet has no effect on the direction of German American i.e., German American and HomeStreet go up and down completely randomly.
Pair Corralation between German American and HomeStreet
Given the investment horizon of 90 days German American is expected to generate 1.18 times less return on investment than HomeStreet. But when comparing it to its historical volatility, German American Bancorp is 2.23 times less risky than HomeStreet. It trades about 0.15 of its potential returns per unit of risk. HomeStreet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 874.00 in HomeStreet on August 31, 2024 and sell it today you would earn a total of 314.00 from holding HomeStreet or generate 35.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
German American Bancorp vs. HomeStreet
Performance |
| Timeline |
| German American Bancorp |
| HomeStreet |
German American and HomeStreet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with German American and HomeStreet
The main advantage of trading using opposite German American and HomeStreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if German American position performs unexpectedly, HomeStreet 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 HomeStreet will offset losses from the drop in HomeStreet's long position.| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
| HomeStreet vs. Heartland Financial USA | HomeStreet vs. Heritage Commerce Corp | HomeStreet vs. Business First Bancshares | HomeStreet vs. German American 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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