Correlation Between Home Bancorp and Banco Do

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

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

Diversification Opportunities for Home Bancorp and Banco Do

-0.82

Correlation Coefficient

Home Bancorp  Banco Do

Pay attention - limited upside

The 3 months correlation between Home and Banco is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and Home Bancorp 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 Home Bancorp are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of Home Bancorp i.e., Home Bancorp and Banco Do go up and down completely randomly.

Pair Corralation between Home Bancorp and Banco Do

Given the investment horizon of 90 days Home Bancorp is expected to generate 0.96 times more return on investment than Banco Do. However, Home Bancorp is 1.04 times less risky than Banco Do. It trades about 0.23 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.19 per unit of risk. If you would invest  4,616  in Home Bancorp on September 4, 2024 and sell it today you would earn a total of  493.00  from holding Home Bancorp or generate 10.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Home Bancorp  vs.  Banco Do Brasil

Home Bancorp

Risk-Adjusted Performance

10 of 100

Good

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

Banco Do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Home Bancorp and Banco Do

The main advantage of trading using opposite Home Bancorp and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Bancorp position performs unexpectedly, Banco Do 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 Banco Do will offset losses from the drop in Banco Do's long position.

The idea behind Home Bancorp and Banco Do Brasil 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.