Correlation Between Home Federal and CF Financial

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

Diversification Opportunities for Home Federal and CF Financial

-0.01

Correlation Coefficient

Home Federal  CF Financial

Good diversification

The 3 months correlation between Home and CFFI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial 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 CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of Home Federal i.e., Home Federal and CF Financial go up and down completely randomly.

Pair Corralation between Home Federal and CF Financial

Given the investment horizon of 90 days Home Federal is expected to generate 4.39 times less return on investment than CF Financial. In addition to that, Home Federal is 1.04 times more volatile than CF Financial. It trades about 0.01 of its total potential returns per unit of risk. CF Financial is currently generating about 0.03 per unit of volatility. If you would invest  5,144  in CF Financial on May 4, 2025 and sell it today you would earn a total of  1,187  from holding CF Financial or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.64%
Values	Daily Returns

Home Federal Bancorp  vs.  CF Financial

Home Federal Bancorp

Risk-Adjusted Performance

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 quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CF Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, CF Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Home Federal and CF Financial

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

The idea behind Home Federal Bancorp and CF Financial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.