Correlation Between Home Federal and American Riviera
Can any of the company-specific risk be diversified away by investing in both Home Federal and American Riviera 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 Federal and American Riviera into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and American Riviera Bank, you can compare the effects of market volatilities on Home Federal and American Riviera 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 Federal with a short position of American Riviera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and American Riviera.
Diversification Opportunities for Home Federal and American Riviera
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and American Riviera Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Riviera Bank and Home Federal 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 Federal Bancorp are associated (or correlated) with American Riviera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Riviera Bank has no effect on the direction of Home Federal i.e., Home Federal and American Riviera go up and down completely randomly.
Pair Corralation between Home Federal and American Riviera
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the American Riviera. In addition to that, Home Federal is 3.88 times more volatile than American Riviera Bank. It trades about -0.02 of its total potential returns per unit of risk. American Riviera Bank is currently generating about 0.05 per unit of volatility. If you would invest 1,974 in American Riviera Bank on August 30, 2024 and sell it today you would earn a total of 13.00 from holding American Riviera Bank or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Home Federal Bancorp vs. American Riviera Bank
Performance |
| Timeline |
| Home Federal Bancorp |
| American Riviera Bank |
Home Federal and American Riviera Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and American Riviera
The main advantage of trading using opposite Home Federal and American Riviera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, American Riviera 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 American Riviera will offset losses from the drop in American Riviera's long position.The idea behind Home Federal Bancorp and American Riviera Bank 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.| American Riviera vs. Invesco High Income | American Riviera vs. Blackrock Muniholdings Ny | American Riviera vs. Nuveen California Select | American Riviera vs. MFS Investment Grade |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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