Correlation Between Transcontinental and Home Federal

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

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

Diversification Opportunities for Transcontinental and Home Federal

0.29

Correlation Coefficient

Transcontinental  Home Federal

Modest diversification

The 3 months correlation between Transcontinental and Home is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Transcontinental Realty Invest 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 Transcontinental 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 Transcontinental Realty Investors 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 Transcontinental i.e., Transcontinental and Home Federal go up and down completely randomly.

Pair Corralation between Transcontinental and Home Federal

Considering the 90-day investment horizon Transcontinental Realty Investors is expected to generate 1.43 times more return on investment than Home Federal. However, Transcontinental is 1.43 times more volatile than Home Federal Bancorp. It trades about 0.16 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.01 per unit of risk. If you would invest  2,940  in Transcontinental Realty Investors on May 4, 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

Transcontinental Realty Invest  vs.  Home Federal Bancorp

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.

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.

Pair Trading with Transcontinental and Home Federal

The main advantage of trading using opposite Transcontinental and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcontinental 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 Transcontinental Realty Investors 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.