Correlation Between Home BancShares and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Home BancShares and National Bankshares 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 National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home BancShares and National Bankshares, you can compare the effects of market volatilities on Home BancShares and National Bankshares 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 National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home BancShares and National Bankshares.
Diversification Opportunities for Home BancShares and National Bankshares
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and National is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Home BancShares and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Home BancShares i.e., Home BancShares and National Bankshares go up and down completely randomly.
Pair Corralation between Home BancShares and National Bankshares
Given the investment horizon of 90 days Home BancShares is expected to generate 1.37 times more return on investment than National Bankshares. However, Home BancShares is 1.37 times more volatile than National Bankshares. It trades about 0.23 of its potential returns per unit of risk. National Bankshares is currently generating about 0.17 per unit of risk. If you would invest 2,749 in Home BancShares on August 31, 2024 and sell it today you would earn a total of 427.00 from holding Home BancShares or generate 15.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home BancShares vs. National Bankshares
Performance |
| Timeline |
| Home BancShares |
| National Bankshares |
Home BancShares and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home BancShares and National Bankshares
The main advantage of trading using opposite Home BancShares and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home BancShares position performs unexpectedly, National Bankshares 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 National Bankshares will offset losses from the drop in National Bankshares' 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 |
| National Bankshares vs. KeyCorp | National Bankshares vs. Comerica | National Bankshares vs. First Horizon National | National Bankshares vs. Western Alliance Bancorporation |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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