Correlation Between Mid Penn and Heritage Financial
Can any of the company-specific risk be diversified away by investing in both Mid Penn and Heritage 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 Mid Penn and Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Penn Bancorp and Heritage Financial, you can compare the effects of market volatilities on Mid Penn and Heritage 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 Mid Penn with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Penn and Heritage Financial.
Diversification Opportunities for Mid Penn and Heritage Financial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and Heritage is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Mid Penn 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 Mid Penn Bancorp are associated (or correlated) with Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of Mid Penn i.e., Mid Penn and Heritage Financial go up and down completely randomly.
Pair Corralation between Mid Penn and Heritage Financial
Considering the 90-day investment horizon Mid Penn is expected to generate 5.03 times less return on investment than Heritage Financial. But when comparing it to its historical volatility, Mid Penn Bancorp is 1.91 times less risky than Heritage Financial. It trades about 0.09 of its potential returns per unit of risk. Heritage Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,151 in Heritage Financial on August 23, 2024 and sell it today you would earn a total of 428.00 from holding Heritage Financial or generate 19.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Penn Bancorp vs. Heritage Financial
Performance |
| Timeline |
| Mid Penn Bancorp |
| Heritage Financial |
Mid Penn and Heritage Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Penn and Heritage Financial
The main advantage of trading using opposite Mid Penn and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Penn position performs unexpectedly, Heritage 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 Heritage Financial will offset losses from the drop in Heritage Financial's long position.| Mid Penn vs. Affinity Bancshares | Mid Penn vs. Home Federal Bancorp | Mid Penn vs. Franklin Financial Services | Mid Penn vs. ACNB Corporation |
| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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