Correlation Between German American and Heartland Financial
Can any of the company-specific risk be diversified away by investing in both German American and Heartland 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 German American and Heartland Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between German American Bancorp and Heartland Financial USA, you can compare the effects of market volatilities on German American and Heartland 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 German American with a short position of Heartland Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of German American and Heartland Financial.
Diversification Opportunities for German American and Heartland Financial
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between German and Heartland is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding German American Bancorp and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA and German American 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 German American Bancorp are associated (or correlated) with Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of German American i.e., German American and Heartland Financial go up and down completely randomly.
Pair Corralation between German American and Heartland Financial
Given the investment horizon of 90 days German American is expected to generate 1.27 times less return on investment than Heartland Financial. But when comparing it to its historical volatility, German American Bancorp is 1.15 times less risky than Heartland Financial. It trades about 0.15 of its potential returns per unit of risk. Heartland Financial USA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,235 in Heartland Financial USA on August 24, 2024 and sell it today you would earn a total of 2,395 from holding Heartland Financial USA or generate 56.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
German American Bancorp vs. Heartland Financial USA
Performance |
| Timeline |
| German American Bancorp |
| Heartland Financial USA |
German American and Heartland Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with German American and Heartland Financial
The main advantage of trading using opposite German American and Heartland Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if German American position performs unexpectedly, Heartland 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 Heartland Financial will offset losses from the drop in Heartland Financial's long position.| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
| Heartland Financial vs. Heritage Commerce Corp | Heartland Financial vs. Business First Bancshares | Heartland Financial vs. German American Bancorp | Heartland Financial vs. Texas Capital Bancshares |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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