Correlation Between Home Federal and Old Point
Can any of the company-specific risk be diversified away by investing in both Home Federal and Old Point 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 Old Point 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 Old Point Financial, you can compare the effects of market volatilities on Home Federal and Old Point 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 Old Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Old Point.
Diversification Opportunities for Home Federal and Old Point
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Old is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Old Point Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Point 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 Old Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Point Financial has no effect on the direction of Home Federal i.e., Home Federal and Old Point go up and down completely randomly.
Pair Corralation between Home Federal and Old Point
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Old Point. In addition to that, Home Federal is 2.64 times more volatile than Old Point Financial. It trades about -0.02 of its total potential returns per unit of risk. Old Point Financial is currently generating about 0.11 per unit of volatility. If you would invest 2,465 in Old Point Financial on October 22, 2024 and sell it today you would earn a total of 45.00 from holding Old Point Financial or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.33% |
| Values | Daily Returns |
Home Federal Bancorp vs. Old Point Financial
Performance |
| Timeline |
| Home Federal Bancorp |
| Old Point Financial |
Home Federal and Old Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Old Point
The main advantage of trading using opposite Home Federal and Old Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Old Point 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 Old Point will offset losses from the drop in Old Point's long position.The idea behind Home Federal Bancorp and Old Point 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.| Old Point vs. Magyar Bancorp | Old Point vs. Home Federal Bancorp | Old Point vs. Community West Bancshares | Old Point vs. First Northwest Bancorp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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