Correlation Between Heritage Financial and Independent Bank
Can any of the company-specific risk be diversified away by investing in both Heritage Financial and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Financial and Independent Bank Group, you can compare the effects of market volatilities on Heritage Financial and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Financial and Independent Bank.
Diversification Opportunities for Heritage Financial and Independent Bank
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heritage and Independent is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Independent Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Heritage Financial i.e., Heritage Financial and Independent Bank go up and down completely randomly.
Pair Corralation between Heritage Financial and Independent Bank
Given the investment horizon of 90 days Heritage Financial is expected to generate 1.02 times more return on investment than Independent Bank. However, Heritage Financial is 1.02 times more volatile than Independent Bank Group. It trades about 0.22 of its potential returns per unit of risk. Independent Bank Group is currently generating about 0.17 per unit of risk. If you would invest 2,289 in Heritage Financial on August 31, 2024 and sell it today you would earn a total of 391.00 from holding Heritage Financial or generate 17.08% 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. Independent Bank Group
Performance |
| Timeline |
| Heritage Financial |
| Independent Bank |
Heritage Financial and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Financial and Independent Bank
The main advantage of trading using opposite Heritage Financial and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank'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 |
| Independent Bank vs. Heritage Financial | Independent Bank vs. ConnectOne Bancorp | Independent Bank vs. Home Bancorp | Independent Bank vs. National Bank Holdings |
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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