Correlation Between HMN Financial and Lake Shore
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Lake Shore 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 Lake Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Lake Shore Bancorp, you can compare the effects of market volatilities on HMN Financial and Lake Shore 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 Lake Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Lake Shore.
Diversification Opportunities for HMN Financial and Lake Shore
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HMN and Lake is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore 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 Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and Lake Shore go up and down completely randomly.
Pair Corralation between HMN Financial and Lake Shore
Given the investment horizon of 90 days HMN Financial is expected to generate 1.24 times more return on investment than Lake Shore. However, HMN Financial is 1.24 times more volatile than Lake Shore Bancorp. It trades about 0.11 of its potential returns per unit of risk. Lake Shore Bancorp is currently generating about 0.05 per unit of risk. If you would invest 2,221 in HMN Financial on August 24, 2024 and sell it today you would earn a total of 578.00 from holding HMN Financial or generate 26.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 77.87% |
| Values | Daily Returns |
HMN Financial vs. Lake Shore Bancorp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Lake Shore Bancorp |
HMN Financial and Lake Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Lake Shore
The main advantage of trading using opposite HMN Financial and Lake Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Lake Shore 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 Lake Shore will offset losses from the drop in Lake Shore'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 |
| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West 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 CEOs Directory module to screen CEOs from public companies around the world.
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