Correlation Between Finward Bancorp and Heritage Commerce

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

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

Diversification Opportunities for Finward Bancorp and Heritage Commerce

0.03

Correlation Coefficient

Finward Bancorp  Heritage Commerce

Significant diversification

The 3 months correlation between Finward and Heritage is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Finward Bancorp and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp and Finward Bancorp 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 Finward Bancorp are associated (or correlated) with Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of Finward Bancorp i.e., Finward Bancorp and Heritage Commerce go up and down completely randomly.

Pair Corralation between Finward Bancorp and Heritage Commerce

Given the investment horizon of 90 days Finward Bancorp is expected to generate 0.78 times more return on investment than Heritage Commerce. However, Finward Bancorp is 1.28 times less risky than Heritage Commerce. It trades about 0.08 of its potential returns per unit of risk. Heritage Commerce Corp is currently generating about 0.06 per unit of risk. If you would invest  2,842  in Finward Bancorp on September 13, 2024 and sell it today you would earn a total of  225.00  from holding Finward Bancorp or generate 7.92% return on investment over 90 days.

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

Finward Bancorp  vs.  Heritage Commerce Corp

Finward Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finward Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Finward Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Heritage Commerce Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Commerce Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Heritage Commerce may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Finward Bancorp and Heritage Commerce

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

The idea behind Finward Bancorp and Heritage Commerce Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.