Correlation Between HMN Financial and ECB Bancorp
Can any of the company-specific risk be diversified away by investing in both HMN Financial and ECB Bancorp 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 ECB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and ECB Bancorp, you can compare the effects of market volatilities on HMN Financial and ECB Bancorp 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 ECB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and ECB Bancorp.
Diversification Opportunities for HMN Financial and ECB Bancorp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HMN and ECB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB 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 ECB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECB Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and ECB Bancorp go up and down completely randomly.
Pair Corralation between HMN Financial and ECB Bancorp
Given the investment horizon of 90 days HMN Financial is expected to generate 1.98 times less return on investment than ECB Bancorp. In addition to that, HMN Financial is 1.72 times more volatile than ECB Bancorp. It trades about 0.03 of its total potential returns per unit of risk. ECB Bancorp is currently generating about 0.1 per unit of volatility. If you would invest 1,432 in ECB Bancorp on August 29, 2024 and sell it today you would earn a total of 58.00 from holding ECB Bancorp or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 20.93% |
| Values | Daily Returns |
HMN Financial vs. ECB Bancorp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| ECB Bancorp |
HMN Financial and ECB Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and ECB Bancorp
The main advantage of trading using opposite HMN Financial and ECB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, ECB Bancorp 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 ECB Bancorp will offset losses from the drop in ECB Bancorp'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 |
| ECB Bancorp vs. Home Federal Bancorp | ECB Bancorp vs. Magyar Bancorp | ECB Bancorp vs. Community West Bancshares | ECB Bancorp vs. Lake Shore Bancorp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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