Correlation Between Community Trust and Heritage Financial
Can any of the company-specific risk be diversified away by investing in both Community Trust 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 Community Trust and Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Trust Bancorp and Heritage Financial, you can compare the effects of market volatilities on Community Trust 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 Community Trust with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Trust and Heritage Financial.
Diversification Opportunities for Community Trust and Heritage Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Community and Heritage is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Community Trust 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 Community Trust Bancorp 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 Community Trust i.e., Community Trust and Heritage Financial go up and down completely randomly.
Pair Corralation between Community Trust and Heritage Financial
Given the investment horizon of 90 days Community Trust Bancorp is expected to under-perform the Heritage Financial. But the stock apears to be less risky and, when comparing its historical volatility, Community Trust Bancorp is 1.12 times less risky than Heritage Financial. The stock trades about -0.13 of its potential returns per unit of risk. The Heritage Financial is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,628 in Heritage Financial on November 1, 2024 and sell it today you would lose (70.20) from holding Heritage Financial or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Trust Bancorp vs. Heritage Financial
Performance |
| Timeline |
| Community Trust Bancorp |
| Heritage Financial |
Community Trust and Heritage Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Trust and Heritage Financial
The main advantage of trading using opposite Community Trust and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Trust 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.| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust Bancshares |
| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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