Correlation Between Middlefield Banc and HMN Financial
Can any of the company-specific risk be diversified away by investing in both Middlefield Banc 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 Middlefield Banc and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middlefield Banc and HMN Financial, you can compare the effects of market volatilities on Middlefield Banc 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 Middlefield Banc with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middlefield Banc and HMN Financial.
Diversification Opportunities for Middlefield Banc and HMN Financial
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Middlefield and HMN is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc i.e., Middlefield Banc and HMN Financial go up and down completely randomly.
Pair Corralation between Middlefield Banc and HMN Financial
Given the investment horizon of 90 days Middlefield Banc is expected to generate 1.22 times less return on investment than HMN Financial. In addition to that, Middlefield Banc is 1.27 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 2,179 in HMN Financial on August 29, 2024 and sell it today you would earn a total of 620.00 from holding HMN Financial or generate 28.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.34% |
| Values | Daily Returns |
Middlefield Banc vs. HMN Financial
Performance |
| Timeline |
| Middlefield Banc |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Middlefield Banc and HMN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middlefield Banc and HMN Financial
The main advantage of trading using opposite Middlefield Banc and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlefield Banc 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.| Middlefield Banc vs. Home Federal Bancorp | Middlefield Banc vs. First Northwest Bancorp | Middlefield Banc vs. First Financial Northwest | Middlefield Banc vs. First Capital |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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