Correlation Between Home Federal and First IC
Can any of the company-specific risk be diversified away by investing in both Home Federal and First IC 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 IC 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 IC, you can compare the effects of market volatilities on Home Federal and First IC 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 IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and First IC.
Diversification Opportunities for Home Federal and First IC
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of Home Federal i.e., Home Federal and First IC go up and down completely randomly.
Pair Corralation between Home Federal and First IC
Given the investment horizon of 90 days Home Federal is expected to generate 12.55 times less return on investment than First IC. But when comparing it to its historical volatility, Home Federal Bancorp is 1.64 times less risky than First IC. It trades about 0.03 of its potential returns per unit of risk. First IC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 720.00 in First IC on December 2, 2024 and sell it today you would earn a total of 310.00 from holding First IC or generate 43.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 21.27% |
| Values | Daily Returns |
Home Federal Bancorp vs. First IC
Performance |
| Timeline |
| Home Federal Bancorp |
| First IC |
Home Federal and First IC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and First IC
The main advantage of trading using opposite Home Federal and First IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, First IC 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 IC will offset losses from the drop in First IC's long position.The idea behind Home Federal Bancorp and First IC 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.| First IC vs. CCFNB Bancorp | ||
| First IC vs. Glen Burnie Bancorp | ||
| First IC vs. Main Street Financial | ||
| First IC vs. Enterprise Financial Services |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |