Correlation Between HMN Financial and Bank7 Corp
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Bank7 Corp 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 HMN Financial and Bank7 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Bank7 Corp, you can compare the effects of market volatilities on HMN Financial and Bank7 Corp 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 HMN Financial with a short position of Bank7 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Bank7 Corp.
Diversification Opportunities for HMN Financial and Bank7 Corp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HMN and Bank7 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Bank7 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank7 Corp and HMN 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 HMN Financial are associated (or correlated) with Bank7 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank7 Corp has no effect on the direction of HMN Financial i.e., HMN Financial and Bank7 Corp go up and down completely randomly.
Pair Corralation between HMN Financial and Bank7 Corp
Given the investment horizon of 90 days HMN Financial is expected to generate 1.89 times less return on investment than Bank7 Corp. But when comparing it to its historical volatility, HMN Financial is 1.04 times less risky than Bank7 Corp. It trades about 0.04 of its potential returns per unit of risk. Bank7 Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,497 in Bank7 Corp on September 3, 2024 and sell it today you would earn a total of 2,229 from holding Bank7 Corp or generate 89.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.92% |
| Values | Daily Returns |
HMN Financial vs. Bank7 Corp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Bank7 Corp |
HMN Financial and Bank7 Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Bank7 Corp
The main advantage of trading using opposite HMN Financial and Bank7 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Bank7 Corp 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 Bank7 Corp will offset losses from the drop in Bank7 Corp's long position.| HMN Financial vs. Magyar Bancorp | HMN Financial vs. Home Federal Bancorp | HMN Financial vs. First Financial Northwest | HMN Financial vs. First Northwest Bancorp |
| Bank7 Corp vs. Home Federal Bancorp | Bank7 Corp vs. First Financial Northwest | Bank7 Corp vs. First Northwest Bancorp | Bank7 Corp vs. First Capital |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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