Correlation Between Provident Bancorp and HMN Financial
Can any of the company-specific risk be diversified away by investing in both Provident Bancorp 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 Provident Bancorp and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Bancorp and HMN Financial, you can compare the effects of market volatilities on Provident Bancorp 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 Provident Bancorp with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Bancorp and HMN Financial.
Diversification Opportunities for Provident Bancorp and HMN Financial
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Provident and HMN is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Provident Bancorp and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Provident Bancorp 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 Provident 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 Provident Bancorp i.e., Provident Bancorp and HMN Financial go up and down completely randomly.
Pair Corralation between Provident Bancorp and HMN Financial
Given the investment horizon of 90 days Provident Bancorp is expected to generate 1.2 times more return on investment than HMN Financial. However, Provident Bancorp is 1.2 times more volatile than HMN Financial. It trades about 0.05 of its potential returns per unit of risk. HMN Financial is currently generating about 0.04 per unit of risk. If you would invest 750.00 in Provident Bancorp on September 3, 2024 and sell it today you would earn a total of 417.00 from holding Provident Bancorp or generate 55.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.92% |
| Values | Daily Returns |
Provident Bancorp vs. HMN Financial
Performance |
| Timeline |
| Provident Bancorp |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Provident Bancorp and HMN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Bancorp and HMN Financial
The main advantage of trading using opposite Provident Bancorp and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Bancorp 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.| Provident Bancorp vs. Home Federal Bancorp | Provident Bancorp vs. Community West Bancshares | Provident Bancorp vs. First Financial Northwest | Provident Bancorp vs. First Northwest Bancorp |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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