Correlation Between Home Federal and Orange County
Can any of the company-specific risk be diversified away by investing in both Home Federal and Orange County 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 Orange County 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 Orange County Bancorp, you can compare the effects of market volatilities on Home Federal and Orange County 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 Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Orange County.
Diversification Opportunities for Home Federal and Orange County
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Orange is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Home Federal i.e., Home Federal and Orange County go up and down completely randomly.
Pair Corralation between Home Federal and Orange County
Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 1.21 times more return on investment than Orange County. However, Home Federal is 1.21 times more volatile than Orange County Bancorp. It trades about 0.02 of its potential returns per unit of risk. Orange County Bancorp is currently generating about -0.1 per unit of risk. If you would invest 1,251 in Home Federal Bancorp on November 8, 2024 and sell it today you would earn a total of 19.00 from holding Home Federal Bancorp or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Home Federal Bancorp vs. Orange County Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| Orange County Bancorp |
Home Federal and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Orange County
The main advantage of trading using opposite Home Federal and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County's long position.The idea behind Home Federal Bancorp and Orange County 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.| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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