Correlation Between Heritage Commerce and HomeStreet

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

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

Diversification Opportunities for Heritage Commerce and HomeStreet

-0.54

Correlation Coefficient

Heritage Commerce  HomeStreet

Excellent diversification

The 3 months correlation between Heritage and HomeStreet is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and HomeStreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeStreet and Heritage Commerce 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 Commerce Corp are associated (or correlated) with HomeStreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeStreet has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and HomeStreet go up and down completely randomly.

Pair Corralation between Heritage Commerce and HomeStreet

Given the investment horizon of 90 days Heritage Commerce Corp is expected to generate 0.44 times more return on investment than HomeStreet. However, Heritage Commerce Corp is 2.27 times less risky than HomeStreet. It trades about 0.06 of its potential returns per unit of risk. HomeStreet is currently generating about -0.03 per unit of risk. If you would invest  976.00  in Heritage Commerce Corp on September 5, 2024 and sell it today you would earn a total of  71.00  from holding Heritage Commerce Corp or generate 7.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Heritage Commerce Corp  vs.  HomeStreet

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 unsteady fundamental drivers, Heritage Commerce may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HomeStreet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Heritage Commerce and HomeStreet

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

The idea behind Heritage Commerce Corp and HomeStreet 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.