Correlation Between Home BancShares and Embassy Bancorp
Can any of the company-specific risk be diversified away by investing in both Home BancShares and Embassy 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 Home BancShares and Embassy Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home BancShares and Embassy Bancorp, you can compare the effects of market volatilities on Home BancShares and Embassy 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 Home BancShares with a short position of Embassy Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home BancShares and Embassy Bancorp.
Diversification Opportunities for Home BancShares and Embassy Bancorp
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Home and Embassy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Home BancShares and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Bancorp and Home 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 Home BancShares are associated (or correlated) with Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of Home BancShares i.e., Home BancShares and Embassy Bancorp go up and down completely randomly.
Pair Corralation between Home BancShares and Embassy Bancorp
Given the investment horizon of 90 days Home BancShares is expected to generate 1.65 times more return on investment than Embassy Bancorp. However, Home BancShares is 1.65 times more volatile than Embassy Bancorp. It trades about 0.03 of its potential returns per unit of risk. Embassy Bancorp is currently generating about -0.07 per unit of risk. If you would invest 2,307 in Home BancShares on January 19, 2024 and sell it today you would earn a total of 20.00 from holding Home BancShares or generate 0.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Home BancShares vs. Embassy Bancorp
Performance |
Timeline |
Home BancShares |
Embassy Bancorp |
Home BancShares and Embassy Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home BancShares and Embassy Bancorp
The main advantage of trading using opposite Home BancShares and Embassy Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home BancShares position performs unexpectedly, Embassy 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 Embassy Bancorp will offset losses from the drop in Embassy Bancorp's long position.Home BancShares vs. Community West Bancshares | Home BancShares vs. First Financial Northwest | Home BancShares vs. First Northwest Bancorp | Home BancShares vs. First Capital |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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