Correlation Between Heartland Financial and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both Heartland Financial 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 Heartland Financial and Prosperity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heartland Financial USA and Prosperity Bancshares, you can compare the effects of market volatilities on Heartland Financial 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 Heartland Financial with a short position of Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Financial and Prosperity Bancshares.
Diversification Opportunities for Heartland Financial and Prosperity Bancshares
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heartland and Prosperity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares and Heartland 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 Heartland Financial USA 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 Heartland Financial i.e., Heartland Financial and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between Heartland Financial and Prosperity Bancshares
Given the investment horizon of 90 days Heartland Financial USA is expected to generate 1.42 times more return on investment than Prosperity Bancshares. However, Heartland Financial is 1.42 times more volatile than Prosperity Bancshares. It trades about 0.04 of its potential returns per unit of risk. Prosperity Bancshares is currently generating about 0.03 per unit of risk. If you would invest 4,585 in Heartland Financial USA on August 23, 2024 and sell it today you would earn a total of 2,045 from holding Heartland Financial USA or generate 44.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heartland Financial USA vs. Prosperity Bancshares
Performance |
| Timeline |
| Heartland Financial USA |
| Prosperity Bancshares |
Heartland Financial and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heartland Financial and Prosperity Bancshares
The main advantage of trading using opposite Heartland Financial and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Financial 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.| Heartland Financial vs. Heritage Commerce Corp | Heartland Financial vs. Business First Bancshares | Heartland Financial vs. German American Bancorp | Heartland Financial vs. Texas Capital Bancshares |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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