Correlation Between Home Federal and Mid Penn
Can any of the company-specific risk be diversified away by investing in both Home Federal and Mid Penn 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 Mid Penn 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 Mid Penn Bancorp, you can compare the effects of market volatilities on Home Federal and Mid Penn 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 Mid Penn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Mid Penn.
Diversification Opportunities for Home Federal and Mid Penn
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Home and Mid is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Mid Penn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Penn Bancorp 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 Mid Penn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Penn Bancorp has no effect on the direction of Home Federal i.e., Home Federal and Mid Penn go up and down completely randomly.
Pair Corralation between Home Federal and Mid Penn
Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 44.26 times more return on investment than Mid Penn. However, Home Federal is 44.26 times more volatile than Mid Penn Bancorp. It trades about 0.09 of its potential returns per unit of risk. Mid Penn Bancorp is currently generating about 0.16 per unit of risk. If you would invest 1,102 in Home Federal Bancorp on August 24, 2024 and sell it today you would earn a total of 127.00 from holding Home Federal Bancorp or generate 11.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.4% |
| Values | Daily Returns |
Home Federal Bancorp vs. Mid Penn Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| Mid Penn Bancorp |
Home Federal and Mid Penn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Mid Penn
The main advantage of trading using opposite Home Federal and Mid Penn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Mid Penn 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 Mid Penn will offset losses from the drop in Mid Penn's long position.The idea behind Home Federal Bancorp and Mid Penn Bancorp 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.| Mid Penn vs. Affinity Bancshares | Mid Penn vs. Home Federal Bancorp | Mid Penn vs. Franklin Financial Services | Mid Penn vs. ACNB Corporation |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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