Correlation Between William Penn and HMN Financial
Can any of the company-specific risk be diversified away by investing in both William Penn 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 William Penn and HMN Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between William Penn Bancorp and HMN Financial, you can compare the effects of market volatilities on William Penn 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 William Penn with a short position of HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and HMN Financial.
Diversification Opportunities for William Penn and HMN Financial
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between William and HMN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and William 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 William Penn 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 William Penn i.e., William Penn and HMN Financial go up and down completely randomly.
Pair Corralation between William Penn and HMN Financial
Given the investment horizon of 90 days William Penn is expected to generate 3.31 times less return on investment than HMN Financial. But when comparing it to its historical volatility, William Penn Bancorp is 2.02 times less risky than HMN Financial. It trades about 0.04 of its potential returns per unit of risk. HMN Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,198 in HMN Financial on August 28, 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 | Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
William Penn Bancorp vs. HMN Financial
Performance |
| Timeline |
| William Penn Bancorp |
| HMN Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
William Penn and HMN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with William Penn and HMN Financial
The main advantage of trading using opposite William Penn and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn 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.| William Penn vs. Fifth Third Bancorp | William Penn vs. Zions Bancorporation | William Penn vs. Huntington Bancshares Incorporated | William Penn vs. Comerica |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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