Correlation Between ServisFirst Bancshares and Home BancShares

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

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

Diversification Opportunities for ServisFirst Bancshares and Home BancShares

0.89

Correlation Coefficient

ServisFirst Bancshares  Home BancShares

Very poor diversification

The 3 months correlation between ServisFirst and Home is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ServisFirst Bancshares and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares and ServisFirst Bancshares 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 ServisFirst Bancshares are associated (or correlated) with Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of ServisFirst Bancshares i.e., ServisFirst Bancshares and Home BancShares go up and down completely randomly.

Pair Corralation between ServisFirst Bancshares and Home BancShares

Given the investment horizon of 90 days ServisFirst Bancshares is expected to generate 1.25 times more return on investment than Home BancShares. However, ServisFirst Bancshares is 1.25 times more volatile than Home BancShares. It trades about 0.15 of its potential returns per unit of risk. Home BancShares is currently generating about 0.06 per unit of risk. If you would invest  7,048  in ServisFirst Bancshares on April 25, 2025 and sell it today you would earn a total of  1,174  from holding ServisFirst Bancshares or generate 16.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ServisFirst Bancshares  vs.  Home BancShares

ServisFirst Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServisFirst Bancshares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, ServisFirst Bancshares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Home BancShares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Home BancShares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home BancShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ServisFirst Bancshares and Home BancShares

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

The idea behind ServisFirst Bancshares and Home 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 Commodity Directory module to find actively traded commodities issued by global exchanges.