Correlation Between Heritage Financial and German American
Can any of the company-specific risk be diversified away by investing in both Heritage Financial and German American 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 Financial and German American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Financial and German American Bancorp, you can compare the effects of market volatilities on Heritage Financial and German American 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 Financial with a short position of German American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Financial and German American.
Diversification Opportunities for Heritage Financial and German American
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heritage and German is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and German American Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on German American Bancorp and Heritage 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 Heritage Financial are associated (or correlated) with German American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of German American Bancorp has no effect on the direction of Heritage Financial i.e., Heritage Financial and German American go up and down completely randomly.
Pair Corralation between Heritage Financial and German American
Given the investment horizon of 90 days Heritage Financial is expected to generate 5.52 times less return on investment than German American. In addition to that, Heritage Financial is 1.21 times more volatile than German American Bancorp. It trades about 0.01 of its total potential returns per unit of risk. German American Bancorp is currently generating about 0.04 per unit of volatility. If you would invest 3,589 in German American Bancorp on August 24, 2024 and sell it today you would earn a total of 1,007 from holding German American Bancorp or generate 28.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Financial vs. German American Bancorp
Performance |
| Timeline |
| Heritage Financial |
| German American Bancorp |
Heritage Financial and German American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Financial and German American
The main advantage of trading using opposite Heritage Financial and German American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial position performs unexpectedly, German American 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 German American will offset losses from the drop in German American's long position.| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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