Correlation Between Aldeyra and Home Federal

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

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

Diversification Opportunities for Aldeyra and Home Federal

-0.4

Correlation Coefficient

Aldeyra  Home Federal

Very good diversification

The 3 months correlation between Aldeyra and Home is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aldeyra 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 Aldeyra 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 Aldeyra 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 Aldeyra i.e., Aldeyra and Home Federal go up and down completely randomly.

Pair Corralation between Aldeyra and Home Federal

Given the investment horizon of 90 days Aldeyra is expected to generate 3.22 times more return on investment than Home Federal. However, Aldeyra is 3.22 times more volatile than Home Federal Bancorp. It trades about 0.17 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.13 per unit of risk. If you would invest  327.00  in Aldeyra on February 1, 2024 and sell it today you would earn a total of  67.00  from holding Aldeyra or generate 20.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aldeyra  vs.  Home Federal Bancorp

Aldeyra

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldeyra are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Aldeyra showed solid returns over the last few months and may actually be approaching a breakup point.

Home Federal Bancorp

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aldeyra and Home Federal

The main advantage of trading using opposite Aldeyra and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldeyra 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 Aldeyra 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.