Correlation Between Home Federal and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both Home Federal and Summit Bancshares 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 Summit Bancshares 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 Summit Bancshares, you can compare the effects of market volatilities on Home Federal and Summit Bancshares 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 Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Summit Bancshares.
Diversification Opportunities for Home Federal and Summit Bancshares
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Summit is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of Home Federal i.e., Home Federal and Summit Bancshares go up and down completely randomly.
Pair Corralation between Home Federal and Summit Bancshares
Given the investment horizon of 90 days Home Federal is expected to generate 11.61 times less return on investment than Summit Bancshares. In addition to that, Home Federal is 1.34 times more volatile than Summit Bancshares. It trades about 0.01 of its total potential returns per unit of risk. Summit Bancshares is currently generating about 0.12 per unit of volatility. If you would invest 4,421 in Summit Bancshares on November 30, 2024 and sell it today you would earn a total of 404.00 from holding Summit Bancshares or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 86.84% |
| Values | Daily Returns |
Home Federal Bancorp vs. Summit Bancshares
Performance |
| Timeline |
| Home Federal Bancorp |
| Summit Bancshares |
Home Federal and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Summit Bancshares
The main advantage of trading using opposite Home Federal and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.The idea behind Home Federal Bancorp and Summit Bancshares 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.| Summit Bancshares vs. Pioneer Bankcorp | Summit Bancshares vs. Liberty Northwest Bancorp | Summit Bancshares vs. First Community | Summit Bancshares vs. Coeur dAlene 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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