Correlation Between Heartland Banccorp and Communities First

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

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

Diversification Opportunities for Heartland Banccorp and Communities First

0.3

Correlation Coefficient

Heartland Banccorp  Communities First

Weak diversification

The 3 months correlation between Heartland and Communities is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Banccorp and Communities First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communities First and Heartland Banccorp 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 Heartland Banccorp are associated (or correlated) with Communities First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communities First has no effect on the direction of Heartland Banccorp i.e., Heartland Banccorp and Communities First go up and down completely randomly.

Pair Corralation between Heartland Banccorp and Communities First

If you would invest  14,163  in Heartland Banccorp on September 4, 2024 and sell it today you would earn a total of  2,417  from holding Heartland Banccorp or generate 17.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Heartland Banccorp  vs.  Communities First Financial

Heartland Banccorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Banccorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Heartland Banccorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Communities First

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Communities First Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Communities First is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Heartland Banccorp and Communities First

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

The idea behind Heartland Banccorp and Communities First 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.