Correlation Between Great Southern and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Great Southern 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 Great Southern and Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Southern Bancorp and Home Bancorp, you can compare the effects of market volatilities on Great Southern 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 Great Southern with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and Home Bancorp.
Diversification Opportunities for Great Southern and Home Bancorp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Great and Home is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and Great Southern 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 Great Southern Bancorp 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 Great Southern i.e., Great Southern and Home Bancorp go up and down completely randomly.
Pair Corralation between Great Southern and Home Bancorp
Given the investment horizon of 90 days Great Southern Bancorp is expected to generate 1.5 times more return on investment than Home Bancorp. However, Great Southern is 1.5 times more volatile than Home Bancorp. It trades about 0.14 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.16 per unit of risk. If you would invest 5,836 in Great Southern Bancorp on August 27, 2024 and sell it today you would earn a total of 568.00 from holding Great Southern Bancorp or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Southern Bancorp vs. Home Bancorp
Performance |
| Timeline |
| Great Southern Bancorp |
| Home Bancorp |
Great Southern and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Southern and Home Bancorp
The main advantage of trading using opposite Great Southern and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Southern 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.| Great Southern vs. First Northwest Bancorp | Great Southern vs. Community West Bancshares | Great Southern vs. First Financial Northwest | Great Southern vs. First Capital |
| 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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