Correlation Between Esquire Financial and HMN Financial
Can any of the company-specific risk be diversified away by investing in both Esquire Financial and HMN 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 Esquire Financial and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Esquire Financial Holdings and HMN Financial, you can compare the effects of market volatilities on Esquire Financial and HMN 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 Esquire Financial with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Esquire Financial and HMN Financial.
Diversification Opportunities for Esquire Financial and HMN Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Esquire and HMN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Esquire Financial Holdings and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Esquire Financial 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 Esquire Financial Holdings are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Esquire Financial i.e., Esquire Financial and HMN Financial go up and down completely randomly.
Pair Corralation between Esquire Financial and HMN Financial
Considering the 90-day investment horizon Esquire Financial Holdings is expected to generate 1.5 times more return on investment than HMN Financial. However, Esquire Financial is 1.5 times more volatile than HMN Financial. It trades about 0.27 of its potential returns per unit of risk. HMN Financial is currently generating about -0.1 per unit of risk. If you would invest 6,151 in Esquire Financial Holdings on September 5, 2024 and sell it today you would earn a total of 1,739 from holding Esquire Financial Holdings or generate 28.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 9.52% |
Values | Daily Returns |
Esquire Financial Holdings vs. HMN Financial
Performance |
Timeline |
Esquire Financial |
HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Esquire Financial and HMN Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Esquire Financial and HMN Financial
The main advantage of trading using opposite Esquire Financial and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esquire Financial position performs unexpectedly, HMN 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 HMN Financial will offset losses from the drop in HMN Financial's long position.Esquire Financial vs. Home Federal Bancorp | Esquire Financial vs. First Financial Northwest | Esquire Financial vs. First Northwest Bancorp | Esquire Financial vs. First Capital |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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