Correlation Between Southern Missouri and Home Federal
Can any of the company-specific risk be diversified away by investing in both Southern Missouri 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 Southern Missouri and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Missouri Bancorp and Home Federal Bancorp, you can compare the effects of market volatilities on Southern Missouri 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 Southern Missouri with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Missouri and Home Federal.
Diversification Opportunities for Southern Missouri and Home Federal
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southern and Home is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southern Missouri Bancorp 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 Southern Missouri 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 Southern Missouri Bancorp 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 Southern Missouri i.e., Southern Missouri and Home Federal go up and down completely randomly.
Pair Corralation between Southern Missouri and Home Federal
Given the investment horizon of 90 days Southern Missouri is expected to generate 26.1 times less return on investment than Home Federal. But when comparing it to its historical volatility, Southern Missouri Bancorp is 29.17 times less risky than Home Federal. It trades about 0.07 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,279 in Home Federal Bancorp on November 5, 2024 and sell it today you would lose (9.00) from holding Home Federal Bancorp or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.87% |
| Values | Daily Returns |
Southern Missouri Bancorp vs. Home Federal Bancorp
Performance |
| Timeline |
| Southern Missouri Bancorp |
| Home Federal Bancorp |
Southern Missouri and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Missouri and Home Federal
The main advantage of trading using opposite Southern Missouri and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Missouri 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.| Southern Missouri vs. Commerzbank AG | Southern Missouri vs. Investar Holding Corp | Southern Missouri vs. Colony Bankcorp | Southern Missouri vs. Western New England |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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