Correlation Between Home Federal and Hawthorn Bancshares
Can any of the company-specific risk be diversified away by investing in both Home Federal and Hawthorn Bancshares 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 Hawthorn Bancshares 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 Hawthorn Bancshares, you can compare the effects of market volatilities on Home Federal and Hawthorn Bancshares 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 Hawthorn Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Hawthorn Bancshares.
Diversification Opportunities for Home Federal and Hawthorn Bancshares
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Home and Hawthorn is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Hawthorn Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawthorn Bancshares 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 Hawthorn Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawthorn Bancshares has no effect on the direction of Home Federal i.e., Home Federal and Hawthorn Bancshares go up and down completely randomly.
Pair Corralation between Home Federal and Hawthorn Bancshares
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Hawthorn Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Home Federal Bancorp is 5.08 times less risky than Hawthorn Bancshares. The stock trades about -0.09 of its potential returns per unit of risk. The Hawthorn Bancshares is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,805 in Hawthorn Bancshares on September 12, 2024 and sell it today you would earn a total of 285.00 from holding Hawthorn Bancshares or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Federal Bancorp vs. Hawthorn Bancshares
Performance |
| Timeline |
| Home Federal Bancorp |
| Hawthorn Bancshares |
Home Federal and Hawthorn Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Hawthorn Bancshares
The main advantage of trading using opposite Home Federal and Hawthorn Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Hawthorn Bancshares 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 Hawthorn Bancshares will offset losses from the drop in Hawthorn Bancshares' long position.The idea behind Home Federal Bancorp and Hawthorn Bancshares 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.| Hawthorn Bancshares vs. Magyar Bancorp | Hawthorn Bancshares vs. Home Federal Bancorp | Hawthorn Bancshares vs. Community West Bancshares | Hawthorn Bancshares vs. LINKBANCORP |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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