Correlation Between Home Federal and Main Street
Can any of the company-specific risk be diversified away by investing in both Home Federal and Main Street 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 Main Street 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 Main Street Financial, you can compare the effects of market volatilities on Home Federal and Main Street 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 Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Main Street.
Diversification Opportunities for Home Federal and Main Street
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Main is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of Home Federal i.e., Home Federal and Main Street go up and down completely randomly.
Pair Corralation between Home Federal and Main Street
Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 19.23 times more return on investment than Main Street. However, Home Federal is 19.23 times more volatile than Main Street Financial. It trades about 0.04 of its potential returns per unit of risk. Main Street Financial is currently generating about 0.0 per unit of risk. If you would invest 1,850 in Home Federal Bancorp on November 5, 2024 and sell it today you would lose (580.00) from holding Home Federal Bancorp or give up 31.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 89.86% |
| Values | Daily Returns |
Home Federal Bancorp vs. Main Street Financial
Performance |
| Timeline |
| Home Federal Bancorp |
| Main Street Financial |
Home Federal and Main Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Main Street
The main advantage of trading using opposite Home Federal and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Main Street 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 Main Street will offset losses from the drop in Main Street's long position.The idea behind Home Federal Bancorp and Main Street Financial 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.| Main Street vs. CCFNB Bancorp | Main Street vs. Burke Herbert Financial | Main Street vs. First IC | Main Street 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |