Correlation Between HMN Financial and Investar Holding
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Investar Holding 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 Investar Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Investar Holding Corp, you can compare the effects of market volatilities on HMN Financial and Investar Holding 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 Investar Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Investar Holding.
Diversification Opportunities for HMN Financial and Investar Holding
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HMN and Investar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Investar Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investar Holding 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 Investar Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investar Holding Corp has no effect on the direction of HMN Financial i.e., HMN Financial and Investar Holding go up and down completely randomly.
Pair Corralation between HMN Financial and Investar Holding
Given the investment horizon of 90 days HMN Financial is expected to generate 1.26 times less return on investment than Investar Holding. In addition to that, HMN Financial is 1.12 times more volatile than Investar Holding Corp. It trades about 0.11 of its total potential returns per unit of risk. Investar Holding Corp is currently generating about 0.16 per unit of volatility. If you would invest 1,567 in Investar Holding Corp on August 24, 2024 and sell it today you would earn a total of 772.00 from holding Investar Holding Corp or generate 49.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.0% |
| Values | Daily Returns |
HMN Financial vs. Investar Holding Corp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Investar Holding Corp |
HMN Financial and Investar Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Investar Holding
The main advantage of trading using opposite HMN Financial and Investar Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Investar Holding 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 Investar Holding will offset losses from the drop in Investar Holding'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 |
| Investar Holding vs. Magyar Bancorp | Investar Holding vs. Home Federal Bancorp | Investar Holding vs. Community West Bancshares | Investar Holding vs. First Northwest 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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