Correlation Between HMN Financial and Southern Missouri
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Southern Missouri 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 Southern Missouri into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Southern Missouri Bancorp, you can compare the effects of market volatilities on HMN Financial and Southern Missouri 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 Southern Missouri. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Southern Missouri.
Diversification Opportunities for HMN Financial and Southern Missouri
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HMN and Southern is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri 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 Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and Southern Missouri go up and down completely randomly.
Pair Corralation between HMN Financial and Southern Missouri
Given the investment horizon of 90 days HMN Financial is expected to generate 1.27 times less return on investment than Southern Missouri. But when comparing it to its historical volatility, HMN Financial is 1.11 times less risky than Southern Missouri. It trades about 0.03 of its potential returns per unit of risk. Southern Missouri Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,822 in Southern Missouri Bancorp on August 26, 2024 and sell it today you would earn a total of 1,817 from holding Southern Missouri Bancorp or generate 37.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.76% |
| Values | Daily Returns |
HMN Financial vs. Southern Missouri Bancorp
Performance |
| Timeline |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Southern Missouri Bancorp |
HMN Financial and Southern Missouri Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Southern Missouri
The main advantage of trading using opposite HMN Financial and Southern Missouri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Southern Missouri 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 Southern Missouri will offset losses from the drop in Southern Missouri'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 |
| Southern Missouri vs. Commerzbank AG | Southern Missouri vs. Investar Holding Corp | Southern Missouri vs. Colony Bankcorp | Southern Missouri vs. Western New England |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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