Correlation Between Home Federal and Burke Herbert
Can any of the company-specific risk be diversified away by investing in both Home Federal and Burke Herbert 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 Burke Herbert 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 Burke Herbert Financial, you can compare the effects of market volatilities on Home Federal and Burke Herbert 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 Burke Herbert. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Burke Herbert.
Diversification Opportunities for Home Federal and Burke Herbert
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Burke is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Burke Herbert Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burke Herbert Financial 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 Burke Herbert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burke Herbert Financial has no effect on the direction of Home Federal i.e., Home Federal and Burke Herbert go up and down completely randomly.
Pair Corralation between Home Federal and Burke Herbert
Given the investment horizon of 90 days Home Federal is expected to generate 17.35 times less return on investment than Burke Herbert. But when comparing it to its historical volatility, Home Federal Bancorp is 1.03 times less risky than Burke Herbert. It trades about 0.01 of its potential returns per unit of risk. Burke Herbert Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,203 in Burke Herbert Financial on August 25, 2024 and sell it today you would earn a total of 666.00 from holding Burke Herbert Financial or generate 10.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.89% |
| Values | Daily Returns |
Home Federal Bancorp vs. Burke Herbert Financial
Performance |
| Timeline |
| Home Federal Bancorp |
| Burke Herbert Financial |
Home Federal and Burke Herbert Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Burke Herbert
The main advantage of trading using opposite Home Federal and Burke Herbert positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Burke Herbert 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 Burke Herbert will offset losses from the drop in Burke Herbert's long position.The idea behind Home Federal Bancorp and Burke Herbert Financial 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.| Burke Herbert vs. Private Bancorp of | Burke Herbert vs. Avidbank Holdings | Burke Herbert vs. American Business Bk | Burke Herbert vs. Home Federal 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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