Correlation Between HomeTrust Bancshares and First Merchants
Can any of the company-specific risk be diversified away by investing in both HomeTrust Bancshares and First Merchants 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 HomeTrust Bancshares and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeTrust Bancshares and First Merchants, you can compare the effects of market volatilities on HomeTrust Bancshares and First Merchants 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 HomeTrust Bancshares with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeTrust Bancshares and First Merchants.
Diversification Opportunities for HomeTrust Bancshares and First Merchants
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HomeTrust and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and HomeTrust 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 HomeTrust Bancshares are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and First Merchants go up and down completely randomly.
Pair Corralation between HomeTrust Bancshares and First Merchants
Given the investment horizon of 90 days HomeTrust Bancshares is expected to generate 1.32 times more return on investment than First Merchants. However, HomeTrust Bancshares is 1.32 times more volatile than First Merchants. It trades about 0.33 of its potential returns per unit of risk. First Merchants is currently generating about 0.33 per unit of risk. If you would invest 3,315 in HomeTrust Bancshares on November 2, 2024 and sell it today you would earn a total of 402.00 from holding HomeTrust Bancshares or generate 12.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HomeTrust Bancshares vs. First Merchants
Performance |
| Timeline |
| HomeTrust Bancshares |
| First Merchants |
HomeTrust Bancshares and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HomeTrust Bancshares and First Merchants
The main advantage of trading using opposite HomeTrust Bancshares and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeTrust Bancshares position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.| HomeTrust Bancshares vs. First Northwest Bancorp | HomeTrust Bancshares vs. Community West Bancshares | HomeTrust Bancshares vs. First Financial Northwest | HomeTrust Bancshares vs. Great Southern Bancorp |
| First Merchants vs. Home Bancorp | First Merchants vs. HomeTrust Bancshares | First Merchants vs. Great Southern Bancorp | First Merchants vs. Finward 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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