Correlation Between Mainstreet Bank and Heartland Banccorp
Can any of the company-specific risk be diversified away by investing in both Mainstreet Bank and Heartland Banccorp 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 Mainstreet Bank and Heartland Banccorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mainstreet Bank and Heartland Banccorp, you can compare the effects of market volatilities on Mainstreet Bank and Heartland Banccorp 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 Mainstreet Bank with a short position of Heartland Banccorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstreet Bank and Heartland Banccorp.
Diversification Opportunities for Mainstreet Bank and Heartland Banccorp
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mainstreet and Heartland is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mainstreet Bank and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp and Mainstreet Bank 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 Mainstreet Bank are associated (or correlated) with Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Mainstreet Bank i.e., Mainstreet Bank and Heartland Banccorp go up and down completely randomly.
Pair Corralation between Mainstreet Bank and Heartland Banccorp
Given the investment horizon of 90 days Mainstreet Bank is expected to under-perform the Heartland Banccorp. But the stock apears to be less risky and, when comparing its historical volatility, Mainstreet Bank is 1.64 times less risky than Heartland Banccorp. The stock trades about -0.03 of its potential returns per unit of risk. The Heartland Banccorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,594 in Heartland Banccorp on August 25, 2024 and sell it today you would earn a total of 8,006 from holding Heartland Banccorp or generate 93.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.65% |
| Values | Daily Returns |
Mainstreet Bank vs. Heartland Banccorp
Performance |
| Timeline |
| Mainstreet Bank |
| Heartland Banccorp |
Mainstreet Bank and Heartland Banccorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstreet Bank and Heartland Banccorp
The main advantage of trading using opposite Mainstreet Bank and Heartland Banccorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstreet Bank position performs unexpectedly, Heartland Banccorp 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 Heartland Banccorp will offset losses from the drop in Heartland Banccorp's long position.| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank vs. First Northwest Bancorp |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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