Correlation Between Heritage Financial and Kyndryl Holdings

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

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

Diversification Opportunities for Heritage Financial and Kyndryl Holdings

0.8

Correlation Coefficient

Heritage Financial  Kyndryl Holdings

Very poor diversification

The 3 months correlation between Heritage and Kyndryl is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Kyndryl Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyndryl Holdings and Heritage 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 Heritage Financial are associated (or correlated) with Kyndryl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyndryl Holdings has no effect on the direction of Heritage Financial i.e., Heritage Financial and Kyndryl Holdings go up and down completely randomly.

Pair Corralation between Heritage Financial and Kyndryl Holdings

Given the investment horizon of 90 days Heritage Financial is expected to generate 3.07 times less return on investment than Kyndryl Holdings. But when comparing it to its historical volatility, Heritage Financial is 1.08 times less risky than Kyndryl Holdings. It trades about 0.08 of its potential returns per unit of risk. Kyndryl Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,362  in Kyndryl Holdings on September 23, 2024 and sell it today you would earn a total of  1,089  from holding Kyndryl Holdings or generate 46.1% return on investment over 90 days.

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

Heritage Financial  vs.  Kyndryl Holdings

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.

Kyndryl Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kyndryl Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Kyndryl Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heritage Financial and Kyndryl Holdings

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

The idea behind Heritage Financial and Kyndryl Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.