Correlation Between HomeTrust Bancshares and First Business

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

By analyzing existing cross correlation between HomeTrust Bancshares and First Business Financial, you can compare the effects of market volatilities on HomeTrust Bancshares and First Business 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 HomeTrust Bancshares with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeTrust Bancshares and First Business.

Diversification Opportunities for HomeTrust Bancshares and First Business

0.96

Correlation Coefficient

HomeTrust Bancshares  First Business

Almost no diversification

The 3 months correlation between HomeTrust and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding HomeTrust Bancshares and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and HomeTrust Bancshares 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 HomeTrust Bancshares are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of HomeTrust Bancshares i.e., HomeTrust Bancshares and First Business go up and down completely randomly.

Pair Corralation between HomeTrust Bancshares and First Business

Given the investment horizon of 90 days HomeTrust Bancshares is expected to under-perform the First Business. But the stock apears to be less risky and, when comparing its historical volatility, HomeTrust Bancshares is 1.1 times less risky than First Business. The stock trades about 0.0 of its potential returns per unit of risk. The First Business Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,430  in First Business Financial on September 22, 2024 and sell it today you would earn a total of  164.00  from holding First Business Financial or generate 3.7% return on investment over 90 days.

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

HomeTrust Bancshares  vs.  First Business Financial

HomeTrust Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeTrust Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

First Business Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Business Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, First Business is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HomeTrust Bancshares and First Business

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

The idea behind HomeTrust Bancshares and First Business Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.