Correlation Between Home Federal and Transcontinental

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

Diversification Opportunities for Home Federal and Transcontinental

0.29

Correlation Coefficient

Home Federal  Transcontinental

Modest diversification

The 3 months correlation between Home and Transcontinental is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of Home Federal i.e., Home Federal and Transcontinental go up and down completely randomly.

Pair Corralation between Home Federal and Transcontinental

Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Transcontinental. But the stock apears to be less risky and, when comparing its historical volatility, Home Federal Bancorp is 1.43 times less risky than Transcontinental. The stock trades about -0.01 of its potential returns per unit of risk. The Transcontinental Realty Investors is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,940  in Transcontinental Realty Investors on May 3, 2025 and sell it today you would earn a total of  1,038  from holding Transcontinental Realty Investors or generate 35.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

Home Federal Bancorp  vs.  Transcontinental Realty Invest

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.

Transcontinental Realty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Federal and Transcontinental

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

The idea behind Home Federal Bancorp and Transcontinental Realty Investors 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.