Correlation Between TC Bancshares and Home Bancorp

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

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

Diversification Opportunities for TC Bancshares and Home Bancorp

-0.11

Correlation Coefficient

TC Bancshares  Home Bancorp

Good diversification

The 3 months correlation between TCBC and Home is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding TC Bancshares and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and TC 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 TC Bancshares are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of TC Bancshares i.e., TC Bancshares and Home Bancorp go up and down completely randomly.

Pair Corralation between TC Bancshares and Home Bancorp

If you would invest  4,320  in Home Bancorp on September 16, 2024 and sell it today you would earn a total of  617.00  from holding Home Bancorp or generate 14.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

TC Bancshares  vs.  Home Bancorp

TC Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TC Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TC Bancshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 8 (%) 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.

Pair Trading with TC Bancshares and Home Bancorp

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

The idea behind TC Bancshares and Home 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.