Correlation Between Home BancShares and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Home BancShares and Dow Jones 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 BancShares and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home BancShares and Dow Jones Industrial, you can compare the effects of market volatilities on Home BancShares and Dow Jones 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 BancShares with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home BancShares and Dow Jones.
Diversification Opportunities for Home BancShares and Dow Jones
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Dow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Home BancShares and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Home BancShares 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 BancShares are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Home BancShares i.e., Home BancShares and Dow Jones go up and down completely randomly.
Pair Corralation between Home BancShares and Dow Jones
Given the investment horizon of 90 days Home BancShares is expected to generate 1.99 times more return on investment than Dow Jones. However, Home BancShares is 1.99 times more volatile than Dow Jones Industrial. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 2,811 in Home BancShares on October 20, 2024 and sell it today you would earn a total of 229.00 from holding Home BancShares or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Home BancShares vs. Dow Jones Industrial
Performance |
| Timeline |
Home BancShares and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Home BancShares
Pair trading matchups for Home BancShares
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Home BancShares and Dow Jones
The main advantage of trading using opposite Home BancShares and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home BancShares position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Home BancShares vs. Community West Bancshares | Home BancShares vs. First Financial Northwest | Home BancShares vs. First Northwest Bancorp | Home BancShares vs. First Capital |
| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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