Correlation Between Home Federal and Investar Holding

Can any of the company-specific risk be diversified away by investing in both Home Federal and Investar Holding 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 Investar Holding 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 Investar Holding Corp, you can compare the effects of market volatilities on Home Federal and Investar Holding 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 Investar Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Investar Holding.

Diversification Opportunities for Home Federal and Investar Holding

0.49

Correlation Coefficient

Home Federal  Investar Holding

Very weak diversification

The 3 months correlation between Home and Investar is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Investar Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investar Holding Corp 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 Investar Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investar Holding Corp has no effect on the direction of Home Federal i.e., Home Federal and Investar Holding go up and down completely randomly.

Pair Corralation between Home Federal and Investar Holding

Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Investar Holding. In addition to that, Home Federal is 1.55 times more volatile than Investar Holding Corp. It trades about -0.15 of its total potential returns per unit of risk. Investar Holding Corp is currently generating about 0.11 per unit of volatility. If you would invest  1,597  in Investar Holding Corp on February 6, 2024 and sell it today you would earn a total of  37.00  from holding Investar Holding Corp or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Home Federal Bancorp  vs.  Investar Holding Corp

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Federal Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Investar Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investar Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Investar Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Home Federal and Investar Holding

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

The idea behind Home Federal Bancorp and Investar Holding Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.