Correlation Between Home Federal and Harbor Bankshares
Can any of the company-specific risk be diversified away by investing in both Home Federal and Harbor Bankshares 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 Harbor Bankshares 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 Harbor Bankshares, you can compare the effects of market volatilities on Home Federal and Harbor Bankshares 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 Harbor Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Harbor Bankshares.
Diversification Opportunities for Home Federal and Harbor Bankshares
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Harbor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Bankshares 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 Harbor Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Bankshares has no effect on the direction of Home Federal i.e., Home Federal and Harbor Bankshares go up and down completely randomly.
Pair Corralation between Home Federal and Harbor Bankshares
Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 15.14 times more return on investment than Harbor Bankshares. However, Home Federal is 15.14 times more volatile than Harbor Bankshares. It trades about 0.05 of its potential returns per unit of risk. Harbor Bankshares is currently generating about -0.01 per unit of risk. If you would invest 1,413 in Home Federal Bancorp on September 12, 2024 and sell it today you would lose (173.00) from holding Home Federal Bancorp or give up 12.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 83.88% |
| Values | Daily Returns |
Home Federal Bancorp vs. Harbor Bankshares
Performance |
| Timeline |
| Home Federal Bancorp |
| Harbor Bankshares |
Home Federal and Harbor Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Harbor Bankshares
The main advantage of trading using opposite Home Federal and Harbor Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Harbor Bankshares 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 Harbor Bankshares will offset losses from the drop in Harbor Bankshares' long position.The idea behind Home Federal Bancorp and Harbor Bankshares 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.| Harbor Bankshares vs. PT Bank Rakyat | Harbor Bankshares vs. Morningstar Unconstrained Allocation | Harbor Bankshares vs. Bondbloxx ETF Trust | Harbor Bankshares vs. Spring Valley Acquisition |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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