Correlation Between Lakeland Financial and Heritage Financial

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

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

Diversification Opportunities for Lakeland Financial and Heritage Financial

0.97

Correlation Coefficient

Lakeland Financial  Heritage Financial

Almost no diversification

The 3 months correlation between Lakeland and Heritage is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Financial and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Lakeland 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 Lakeland Financial are associated (or correlated) with Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of Lakeland Financial i.e., Lakeland Financial and Heritage Financial go up and down completely randomly.

Pair Corralation between Lakeland Financial and Heritage Financial

Given the investment horizon of 90 days Lakeland Financial is expected to generate 1.12 times more return on investment than Heritage Financial. However, Lakeland Financial is 1.12 times more volatile than Heritage Financial. It trades about -0.06 of its potential returns per unit of risk. Heritage Financial is currently generating about -0.1 per unit of risk. If you would invest  7,551  in Lakeland Financial on September 12, 2024 and sell it today you would lose (136.00) from holding Lakeland Financial or give up 1.8% of portfolio value over 90 days.

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

Lakeland Financial  vs.  Heritage Financial

Lakeland Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Lakeland Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Heritage Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 11 (%) 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.

Pair Trading with Lakeland Financial and Heritage Financial

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

The idea behind Lakeland Financial and Heritage 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..