Correlation Between Heritage Commerce and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Heritage Commerce and Arrow Financial 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 Heritage Commerce and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Commerce Corp and Arrow Financial, you can compare the effects of market volatilities on Heritage Commerce and Arrow Financial 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 Heritage Commerce with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Commerce and Arrow Financial.
Diversification Opportunities for Heritage Commerce and Arrow Financial
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heritage and Arrow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and Arrow Financial go up and down completely randomly.
Pair Corralation between Heritage Commerce and Arrow Financial
Given the investment horizon of 90 days Heritage Commerce is expected to generate 1.74 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Heritage Commerce Corp is 1.16 times less risky than Arrow Financial. It trades about 0.06 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,784 in Arrow Financial on August 28, 2024 and sell it today you would earn a total of 1,551 from holding Arrow Financial or generate 86.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Commerce Corp vs. Arrow Financial
Performance |
| Timeline |
| Heritage Commerce Corp |
| Arrow Financial |
Heritage Commerce and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Commerce and Arrow Financial
The main advantage of trading using opposite Heritage Commerce and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Commerce position performs unexpectedly, Arrow Financial 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Heritage Commerce vs. Home Federal Bancorp | Heritage Commerce vs. First Financial Northwest | Heritage Commerce vs. First Northwest Bancorp | Heritage Commerce vs. First Capital |
| Arrow Financial vs. Fifth Third Bancorp | Arrow Financial vs. Huntington Bancshares Incorporated | Arrow Financial vs. MT Bank |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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