Correlation Between AMB Financial and Heritage Financial

Can any of the company-specific risk be diversified away by investing in both AMB Financial 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 AMB Financial and Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AMB Financial Corp and Heritage Financial, you can compare the effects of market volatilities on AMB Financial 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 AMB Financial with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMB Financial and Heritage Financial.

Diversification Opportunities for AMB Financial and Heritage Financial

0.0

Correlation Coefficient

AMB Financial  Heritage Financial

Pay attention - limited upside

The 3 months correlation between AMB and Heritage is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AMB Financial Corp and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and AMB Financial 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 AMB Financial Corp 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 AMB Financial i.e., AMB Financial and Heritage Financial go up and down completely randomly.

Pair Corralation between AMB Financial and Heritage Financial

Given the investment horizon of 90 days AMB Financial Corp is expected to under-perform the Heritage Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, AMB Financial Corp is 1.44 times less risky than Heritage Financial. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Heritage Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,754  in Heritage Financial on October 7, 2024 and sell it today you would lose (336.00) from holding Heritage Financial or give up 12.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.41%
Values	Daily Returns

AMB Financial Corp  vs.  Heritage Financial

AMB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AMB Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Heritage Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AMB Financial and Heritage Financial

The main advantage of trading using opposite AMB Financial and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMB Financial 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.

The idea behind AMB Financial Corp and Heritage Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.