Correlation Between Heritage Commerce and HomeTrust Bancshares

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

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

Diversification Opportunities for Heritage Commerce and HomeTrust Bancshares

0.69

Correlation Coefficient

Heritage Commerce  HomeTrust Bancshares

Poor diversification

The 3 months correlation between Heritage and HomeTrust is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Heritage Commerce and HomeTrust Bancshares

Given the investment horizon of 90 days Heritage Commerce Corp is expected to under-perform the HomeTrust Bancshares. In addition to that, Heritage Commerce is 1.18 times more volatile than HomeTrust Bancshares. It trades about 0.0 of its total potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.02 per unit of volatility. If you would invest  2,422  in HomeTrust Bancshares on March 2, 2024 and sell it today you would earn a total of  334.00  from holding HomeTrust Bancshares or generate 13.79% return on investment over 90 days.

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

Heritage Commerce Corp  vs.  HomeTrust Bancshares

Heritage Commerce Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Commerce Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Heritage Commerce is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

HomeTrust Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Heritage Commerce and HomeTrust Bancshares

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

The idea behind Heritage Commerce Corp and HomeTrust Bancshares 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.