Correlation Between Lake Shore and HMN Financial
Can any of the company-specific risk be diversified away by investing in both Lake Shore and HMN 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 Lake Shore and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Shore Bancorp and HMN Financial, you can compare the effects of market volatilities on Lake Shore and HMN 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 Lake Shore with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and HMN Financial.
Diversification Opportunities for Lake Shore and HMN Financial
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lake and HMN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Lake Shore i.e., Lake Shore and HMN Financial go up and down completely randomly.
Pair Corralation between Lake Shore and HMN Financial
Given the investment horizon of 90 days Lake Shore is expected to generate 1.39 times less return on investment than HMN Financial. In addition to that, Lake Shore is 1.03 times more volatile than HMN Financial. It trades about 0.02 of its total potential returns per unit of risk. HMN Financial is currently generating about 0.04 per unit of volatility. If you would invest 2,198 in HMN Financial on August 27, 2024 and sell it today you would earn a total of 601.00 from holding HMN Financial or generate 27.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.83% |
| Values | Daily Returns |
Lake Shore Bancorp vs. HMN Financial
Performance |
| Timeline |
| Lake Shore Bancorp |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Lake Shore and HMN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and HMN Financial
The main advantage of trading using opposite Lake Shore and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, HMN 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 HMN Financial will offset losses from the drop in HMN Financial's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| HMN Financial vs. Magyar Bancorp | HMN Financial vs. Home Federal Bancorp | HMN Financial vs. First Financial Northwest | HMN Financial vs. First Northwest 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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