Correlation Between Heritage Commerce and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both Heritage Commerce and Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares, you can compare the effects of market volatilities on Heritage Commerce and Prosperity Bancshares 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 Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Commerce and Prosperity Bancshares.
Diversification Opportunities for Heritage Commerce and Prosperity Bancshares
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Heritage and Prosperity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares 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 Prosperity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Bancshares has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between Heritage Commerce and Prosperity Bancshares
Given the investment horizon of 90 days Heritage Commerce is expected to generate 7.14 times less return on investment than Prosperity Bancshares. In addition to that, Heritage Commerce is 1.28 times more volatile than Prosperity Bancshares. It trades about 0.01 of its total potential returns per unit of risk. Prosperity Bancshares is currently generating about 0.11 per unit of volatility. If you would invest 6,967 in Prosperity Bancshares on October 31, 2024 and sell it today you would earn a total of 1,033 from holding Prosperity Bancshares or generate 14.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Commerce Corp vs. Prosperity Bancshares
Performance |
| Timeline |
| Heritage Commerce Corp |
| Prosperity Bancshares |
Heritage Commerce and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Commerce and Prosperity Bancshares
The main advantage of trading using opposite Heritage Commerce and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Commerce position performs unexpectedly, Prosperity Bancshares 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 Prosperity Bancshares will offset losses from the drop in Prosperity Bancshares' 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 |
| Prosperity Bancshares vs. Heartland Financial USA | Prosperity Bancshares vs. Heritage Commerce Corp | Prosperity Bancshares vs. Business First Bancshares | Prosperity Bancshares vs. German American 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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