Correlation Between Mainstreet Bank and Home Federal
Can any of the company-specific risk be diversified away by investing in both Mainstreet Bank and Home Federal 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 Mainstreet Bank and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mainstreet Bank and Home Federal Bancorp, you can compare the effects of market volatilities on Mainstreet Bank and Home Federal 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 Mainstreet Bank with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstreet Bank and Home Federal.
Diversification Opportunities for Mainstreet Bank and Home Federal
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mainstreet and Home is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mainstreet Bank and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and Mainstreet Bank 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 Mainstreet Bank are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Mainstreet Bank i.e., Mainstreet Bank and Home Federal go up and down completely randomly.
Pair Corralation between Mainstreet Bank and Home Federal
Given the investment horizon of 90 days Mainstreet Bank is expected to under-perform the Home Federal. But the stock apears to be less risky and, when comparing its historical volatility, Mainstreet Bank is 20.61 times less risky than Home Federal. The stock trades about -0.02 of its potential returns per unit of risk. The Home Federal Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,630 in Home Federal Bancorp on August 30, 2024 and sell it today you would lose (394.00) from holding Home Federal Bancorp or give up 24.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.3% |
| Values | Daily Returns |
Mainstreet Bank vs. Home Federal Bancorp
Performance |
| Timeline |
| Mainstreet Bank |
| Home Federal Bancorp |
Mainstreet Bank and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstreet Bank and Home Federal
The main advantage of trading using opposite Mainstreet Bank and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstreet Bank position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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