Correlation Between Central Valley and Home Federal

Can any of the company-specific risk be diversified away by investing in both Central Valley 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 Central Valley and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Valley Community and Home Federal Bancorp, you can compare the effects of market volatilities on Central Valley 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 Central Valley with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Valley and Home Federal.

Diversification Opportunities for Central Valley and Home Federal

0.06

Correlation Coefficient

Central Valley  Home Federal

Significant diversification

The 3 months correlation between Central and Home is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Central Valley Community 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 Central Valley 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 Central Valley Community 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 Central Valley i.e., Central Valley and Home Federal go up and down completely randomly.

Pair Corralation between Central Valley and Home Federal

If you would invest  0.00  in Home Federal Bancorp on September 5, 2024 and sell it today you would earn a total of  1,230  from holding Home Federal Bancorp or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Central Valley Community  vs.  Home Federal Bancorp

Central Valley Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Valley Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Central Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Home Federal Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Home Federal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Valley and Home Federal

The main advantage of trading using opposite Central Valley and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Valley 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.

The idea behind Central Valley Community and Home Federal Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.