Correlation Between Home Bancorp and Rhinebeck Bancorp

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

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

Diversification Opportunities for Home Bancorp and Rhinebeck Bancorp

0.58

Correlation Coefficient

Home Bancorp  Rhinebeck Bancorp

Very weak diversification

The 3 months correlation between Home and Rhinebeck is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Rhinebeck Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhinebeck Bancorp 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 Rhinebeck Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhinebeck Bancorp has no effect on the direction of Home Bancorp i.e., Home Bancorp and Rhinebeck Bancorp go up and down completely randomly.

Pair Corralation between Home Bancorp and Rhinebeck Bancorp

Given the investment horizon of 90 days Home Bancorp is expected to generate 1.33 times less return on investment than Rhinebeck Bancorp. In addition to that, Home Bancorp is 1.23 times more volatile than Rhinebeck Bancorp. It trades about 0.1 of its total potential returns per unit of risk. Rhinebeck Bancorp is currently generating about 0.16 per unit of volatility. If you would invest  816.00  in Rhinebeck Bancorp on September 17, 2024 and sell it today you would earn a total of  145.00  from holding Rhinebeck Bancorp or generate 17.77% return on investment over 90 days.

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

Home Bancorp  vs.  Rhinebeck Bancorp

Home Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Rhinebeck Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rhinebeck Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward-looking signals, Rhinebeck Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Bancorp and Rhinebeck Bancorp

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

The idea behind Home Bancorp and Rhinebeck 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.