Correlation Between Red River and Hilltop Holdings
Can any of the company-specific risk be diversified away by investing in both Red River and Hilltop Holdings 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 Red River and Hilltop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red River Bancshares and Hilltop Holdings, you can compare the effects of market volatilities on Red River and Hilltop Holdings 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 Red River with a short position of Hilltop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red River and Hilltop Holdings.
Diversification Opportunities for Red River and Hilltop Holdings
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Red and Hilltop is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings and Red River 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 Red River Bancshares are associated (or correlated) with Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of Red River i.e., Red River and Hilltop Holdings go up and down completely randomly.
Pair Corralation between Red River and Hilltop Holdings
Given the investment horizon of 90 days Red River Bancshares is expected to generate 0.67 times more return on investment than Hilltop Holdings. However, Red River Bancshares is 1.5 times less risky than Hilltop Holdings. It trades about 0.37 of its potential returns per unit of risk. Hilltop Holdings is currently generating about 0.08 per unit of risk. If you would invest 5,222 in Red River Bancshares on September 1, 2024 and sell it today you would earn a total of 783.00 from holding Red River Bancshares or generate 14.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red River Bancshares vs. Hilltop Holdings
Performance |
| Timeline |
| Red River Bancshares |
| Hilltop Holdings |
Red River and Hilltop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red River and Hilltop Holdings
The main advantage of trading using opposite Red River and Hilltop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red River position performs unexpectedly, Hilltop Holdings 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 Hilltop Holdings will offset losses from the drop in Hilltop Holdings' long position.| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck Bancorp |
| Hilltop Holdings vs. Home Federal Bancorp | Hilltop Holdings vs. First Financial Northwest | Hilltop Holdings vs. First Northwest Bancorp | Hilltop Holdings vs. First Capital |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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