Correlation Between HMN Financial and Community Trust
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Community Trust 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 Community Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Community Trust Bancorp, you can compare the effects of market volatilities on HMN Financial and Community Trust 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 Community Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Community Trust.
Diversification Opportunities for HMN Financial and Community Trust
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HMN and Community is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp 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 Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and Community Trust go up and down completely randomly.
Pair Corralation between HMN Financial and Community Trust
Given the investment horizon of 90 days HMN Financial is expected to generate 1.33 times less return on investment than Community Trust. In addition to that, HMN Financial is 1.28 times more volatile than Community Trust Bancorp. It trades about 0.06 of its total potential returns per unit of risk. Community Trust Bancorp is currently generating about 0.09 per unit of volatility. If you would invest 3,417 in Community Trust Bancorp on August 28, 2024 and sell it today you would earn a total of 2,590 from holding Community Trust Bancorp or generate 75.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 89.55% |
| Values | Daily Returns |
HMN Financial vs. Community Trust Bancorp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Community Trust Bancorp |
HMN Financial and Community Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Community Trust
The main advantage of trading using opposite HMN Financial and Community Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Community Trust 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 Community Trust will offset losses from the drop in Community Trust'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 |
| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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