Correlation Between Central Valley and Heritage Financial

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

By analyzing existing cross correlation between Central Valley Community and Heritage Financial, you can compare the effects of market volatilities on Central Valley and Heritage Financial 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 Central Valley with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Valley and Heritage Financial.

Diversification Opportunities for Central Valley and Heritage Financial

0.62

Correlation Coefficient

Central Valley  Heritage Financial

Poor diversification

The 3 months correlation between Central and Heritage is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Central Valley Community and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Central Valley 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 Central Valley Community are associated (or correlated) with Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of Central Valley i.e., Central Valley and Heritage Financial go up and down completely randomly.

Pair Corralation between Central Valley and Heritage Financial

If you would invest  2,183  in Heritage Financial on September 23, 2024 and sell it today you would earn a total of  254.00  from holding Heritage Financial or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Central Valley Community  vs.  Heritage Financial

Central Valley Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Valley Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Central Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Heritage Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Valley and Heritage Financial

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

The idea behind Central Valley Community and Heritage Financial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.