Correlation Between Home Federal and Isabella Bank
Can any of the company-specific risk be diversified away by investing in both Home Federal and Isabella Bank 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 Isabella Bank 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 Isabella Bank, you can compare the effects of market volatilities on Home Federal and Isabella Bank 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 Isabella Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Isabella Bank.
Diversification Opportunities for Home Federal and Isabella Bank
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Isabella is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Isabella Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isabella Bank 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 Isabella Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isabella Bank has no effect on the direction of Home Federal i.e., Home Federal and Isabella Bank go up and down completely randomly.
Pair Corralation between Home Federal and Isabella Bank
Given the investment horizon of 90 days Home Federal is expected to generate 32.36 times less return on investment than Isabella Bank. In addition to that, Home Federal is 1.57 times more volatile than Isabella Bank. It trades about 0.01 of its total potential returns per unit of risk. Isabella Bank is currently generating about 0.31 per unit of volatility. If you would invest 2,012 in Isabella Bank on August 26, 2024 and sell it today you would earn a total of 472.00 from holding Isabella Bank or generate 23.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.64% |
| Values | Daily Returns |
Home Federal Bancorp vs. Isabella Bank
Performance |
| Timeline |
| Home Federal Bancorp |
| Isabella Bank |
Home Federal and Isabella Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Isabella Bank
The main advantage of trading using opposite Home Federal and Isabella Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Isabella Bank 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 Isabella Bank will offset losses from the drop in Isabella Bank's long position.The idea behind Home Federal Bancorp and Isabella Bank 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.| Isabella Bank vs. Home Federal Bancorp | Isabella Bank vs. Magyar Bancorp | Isabella Bank vs. ChoiceOne Financial Services | Isabella Bank vs. Heritage Commerce Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
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