Correlation Between HMN Financial and Central Valley

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

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

Diversification Opportunities for HMN Financial and Central Valley

0.18

Correlation Coefficient

HMN Financial  Central Valley

Average diversification

The 3 months correlation between HMN and Central is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Central Valley Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Valley Community and HMN 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 HMN Financial are associated (or correlated) with Central Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Valley Community has no effect on the direction of HMN Financial i.e., HMN Financial and Central Valley go up and down completely randomly.

Pair Corralation between HMN Financial and Central Valley

If you would invest  2,615  in HMN Financial on September 5, 2024 and sell it today you would earn a total of  184.00  from holding HMN Financial or generate 7.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.85%
Values	Daily Returns

HMN Financial  vs.  Central Valley Community

HMN Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, HMN Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with HMN Financial and Central Valley

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

The idea behind HMN Financial and Central Valley Community 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.