Correlation Between Home Federal and Bank Of Princeton

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

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

Diversification Opportunities for Home Federal and Bank Of Princeton

0.05

Correlation Coefficient

Home Federal  Bank Of Princeton

Significant diversification

The 3 months correlation between Home and Bank is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Bank Of Princeton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Princeton and Home Federal 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 Federal Bancorp are associated (or correlated) with Bank Of Princeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Princeton has no effect on the direction of Home Federal i.e., Home Federal and Bank Of Princeton go up and down completely randomly.

Pair Corralation between Home Federal and Bank Of Princeton

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 39.39 times more return on investment than Bank Of Princeton. However, Home Federal is 39.39 times more volatile than Bank Of Princeton. It trades about 0.06 of its potential returns per unit of risk. Bank Of Princeton is currently generating about 0.04 per unit of risk. If you would invest  1,221  in Home Federal Bancorp on September 15, 2024 and sell it today you would earn a total of  96.00  from holding Home Federal Bancorp or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.85%
Values	Daily Returns

Home Federal Bancorp  vs.  Bank Of Princeton

Home Federal Bancorp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank Of Princeton

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of Princeton are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bank Of Princeton is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Home Federal and Bank Of Princeton

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

The idea behind Home Federal Bancorp and Bank Of Princeton 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.