Correlation Between Peapack Gladstone and HMN Financial

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

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

Diversification Opportunities for Peapack Gladstone and HMN Financial

0.59

Correlation Coefficient

Peapack Gladstone  HMN Financial

Very weak diversification

The 3 months correlation between Peapack and HMN is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Peapack Gladstone Financial and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Peapack Gladstone 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 Peapack Gladstone Financial are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Peapack Gladstone i.e., Peapack Gladstone and HMN Financial go up and down completely randomly.

Pair Corralation between Peapack Gladstone and HMN Financial

Considering the 90-day investment horizon Peapack Gladstone Financial is expected to generate 1.28 times more return on investment than HMN Financial. However, Peapack Gladstone is 1.28 times more volatile than HMN Financial. It trades about 0.16 of its potential returns per unit of risk. HMN Financial is currently generating about 0.08 per unit of risk. If you would invest  2,751  in Peapack Gladstone Financial on September 3, 2024 and sell it today you would earn a total of  863.00  from holding Peapack Gladstone Financial or generate 31.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	43.75%
Values	Daily Returns

Peapack Gladstone Financial  vs.  HMN Financial

Peapack Gladstone

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Peapack Gladstone Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Peapack Gladstone exhibited solid returns over the last few months and may actually be approaching a breakup point.

HMN Financial

Risk-Adjusted Performance

0 of 100

Modest

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Peapack Gladstone and HMN Financial

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

The idea behind Peapack Gladstone Financial and HMN 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.