Correlation Between Home Federal and First Business
Can any of the company-specific risk be diversified away by investing in both Home Federal and First Business 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 First Business 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 First Business Financial, you can compare the effects of market volatilities on Home Federal and First Business 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 First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and First Business.
Diversification Opportunities for Home Federal and First Business
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Home and First is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business 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 First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Home Federal i.e., Home Federal and First Business go up and down completely randomly.
Pair Corralation between Home Federal and First Business
Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 31.53 times more return on investment than First Business. However, Home Federal is 31.53 times more volatile than First Business Financial. It trades about 0.06 of its potential returns per unit of risk. First Business Financial is currently generating about 0.09 per unit of risk. If you would invest 1,326 in Home Federal Bancorp on August 28, 2024 and sell it today you would lose (90.00) from holding Home Federal Bancorp or give up 6.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.87% |
| Values | Daily Returns |
Home Federal Bancorp vs. First Business Financial
Performance |
| Timeline |
| Home Federal Bancorp |
| First Business Financial |
Home Federal and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and First Business
The main advantage of trading using opposite Home Federal and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, First Business 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 First Business will offset losses from the drop in First Business' long position.| Home Federal vs. Fifth Third Bancorp | Home Federal vs. Zions Bancorporation | Home Federal vs. Huntington Bancshares Incorporated | Home Federal vs. Comerica |
| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. Comerica |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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