Correlation Between Main Street and Home Federal
Can any of the company-specific risk be diversified away by investing in both Main Street 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 Main Street and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Financial and Home Federal Bancorp, you can compare the effects of market volatilities on Main Street 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 Main Street with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Home Federal.
Diversification Opportunities for Main Street and Home Federal
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Main and Home is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial 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 Main Street 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 Main Street Financial 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 Main Street i.e., Main Street and Home Federal go up and down completely randomly.
Pair Corralation between Main Street and Home Federal
Given the investment horizon of 90 days Main Street Financial is expected to under-perform the Home Federal. But the otc stock apears to be less risky and, when comparing its historical volatility, Main Street Financial is 19.23 times less risky than Home Federal. The otc stock trades about 0.0 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 1,850 in Home Federal Bancorp on November 5, 2024 and sell it today you would lose (580.00) from holding Home Federal Bancorp or give up 31.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 89.86% |
| Values | Daily Returns |
Main Street Financial vs. Home Federal Bancorp
Performance |
| Timeline |
| Main Street Financial |
| Home Federal Bancorp |
Main Street and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Home Federal
The main advantage of trading using opposite Main Street and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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.| Main Street vs. CCFNB Bancorp | Main Street vs. Burke Herbert Financial | Main Street vs. First IC | Main Street vs. Enterprise Financial Services |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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