Correlation Between Small Cap and HomeTrust Bancshares

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

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

Diversification Opportunities for Small Cap and HomeTrust Bancshares

0.43

Correlation Coefficient

Small Cap  HomeTrust Bancshares

Very weak diversification

The 3 months correlation between Small and HomeTrust is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and Small Cap 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 Small Cap Core 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 Small Cap i.e., Small Cap and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Small Cap and HomeTrust Bancshares

Assuming the 90 days horizon Small Cap is expected to generate 5.64 times less return on investment than HomeTrust Bancshares. But when comparing it to its historical volatility, Small Cap Core is 1.47 times less risky than HomeTrust Bancshares. It trades about 0.06 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,473  in HomeTrust Bancshares on March 22, 2024 and sell it today you would earn a total of  362.00  from holding HomeTrust Bancshares or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Small Cap Core  vs.  HomeTrust Bancshares

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HomeTrust Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, HomeTrust Bancshares may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Small Cap and HomeTrust Bancshares

The main advantage of trading using opposite Small Cap and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 Small Cap Core 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.