Correlation Between Insmed and Home Federal

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Can any of the company-specific risk be diversified away by investing in both Insmed and Home Federal 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 Insmed and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insmed Inc and Home Federal Bancorp, you can compare the effects of market volatilities on Insmed and Home Federal 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 Insmed with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insmed and Home Federal.

Diversification Opportunities for Insmed and Home Federal

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Insmed and Home is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Insmed Inc and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp and Insmed 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 Insmed Inc are associated (or correlated) with Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Insmed i.e., Insmed and Home Federal go up and down completely randomly.

Pair Corralation between Insmed and Home Federal

Given the investment horizon of 90 days Insmed Inc is expected to generate 0.84 times more return on investment than Home Federal. However, Insmed Inc is 1.19 times less risky than Home Federal. It trades about 0.02 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.03 per unit of risk. If you would invest  2,403  in Insmed Inc on February 21, 2024 and sell it today you would earn a total of  50.00  from holding Insmed Inc or generate 2.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.93%
ValuesDaily Returns

Insmed Inc  vs.  Home Federal Bancorp

 Performance 
       Timeline  
Insmed Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Insmed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Home Federal Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Insmed and Home Federal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Insmed and Home Federal

The main advantage of trading using opposite Insmed and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insmed position performs unexpectedly, Home Federal 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 Federal will offset losses from the drop in Home Federal's long position.
The idea behind Insmed Inc and Home Federal 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.
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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