Correlation Between Home Bancorp and HomeTrust Bancshares

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Can any of the company-specific risk be diversified away by investing in both Home Bancorp 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 Home Bancorp and HomeTrust Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Bancorp and HomeTrust Bancshares, you can compare the effects of market volatilities on Home Bancorp 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 Home Bancorp with a short position of HomeTrust Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Bancorp and HomeTrust Bancshares.

Diversification Opportunities for Home Bancorp and HomeTrust Bancshares

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Home and HomeTrust is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and Home Bancorp 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 Home 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 Home Bancorp i.e., Home Bancorp and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Home Bancorp and HomeTrust Bancshares

Given the investment horizon of 90 days Home Bancorp is expected to generate 1.98 times less return on investment than HomeTrust Bancshares. But when comparing it to its historical volatility, Home Bancorp is 1.32 times less risky than HomeTrust Bancshares. It trades about 0.11 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,346  in HomeTrust Bancshares on August 24, 2024 and sell it today you would earn a total of  398.00  from holding HomeTrust Bancshares or generate 11.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Home Bancorp  vs.  HomeTrust Bancshares

 Performance 
       Timeline  
Home Bancorp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.
HomeTrust Bancshares 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Home Bancorp and HomeTrust Bancshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Bancorp and HomeTrust Bancshares

The main advantage of trading using opposite Home Bancorp and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Bancorp 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 Home 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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