Correlation Between John Marshall and Home Federal

Can any of the company-specific risk be diversified away by investing in both John Marshall 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 John Marshall and Home Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Marshall Bancorp and Home Federal Bancorp, you can compare the effects of market volatilities on John Marshall 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 John Marshall with a short position of Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Marshall and Home Federal.

Diversification Opportunities for John Marshall and Home Federal

0.1

Correlation Coefficient

John Marshall  Home Federal

Average diversification

The 3 months correlation between John and Home is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding John Marshall Bancorp 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 John Marshall 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 John Marshall Bancorp 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 John Marshall i.e., John Marshall and Home Federal go up and down completely randomly.

Pair Corralation between John Marshall and Home Federal

Given the investment horizon of 90 days John Marshall is expected to generate 29.9 times less return on investment than Home Federal. But when comparing it to its historical volatility, John Marshall Bancorp is 50.24 times less risky than Home Federal. It trades about 0.2 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Home Federal Bancorp on August 14, 2024 and sell it today you would lose (102.00) from holding Home Federal Bancorp or give up 7.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

John Marshall Bancorp  vs.  Home Federal Bancorp

John Marshall Bancorp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Marshall Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, John Marshall sustained solid returns over the last few months and may actually be approaching a breakup point.

Home Federal Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Home Federal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Marshall and Home Federal

The main advantage of trading using opposite John Marshall and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Marshall 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 John Marshall Bancorp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.