Correlation Between Banner and Heritage Financial

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

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

Diversification Opportunities for Banner and Heritage Financial

0.93

Correlation Coefficient

Banner  Heritage Financial

Almost no diversification

The 3 months correlation between Banner and Heritage is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Banner and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Banner 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 Banner 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 Banner i.e., Banner and Heritage Financial go up and down completely randomly.

Pair Corralation between Banner and Heritage Financial

Given the investment horizon of 90 days Banner is expected to generate 0.98 times more return on investment than Heritage Financial. However, Banner is 1.02 times less risky than Heritage Financial. It trades about 0.01 of its potential returns per unit of risk. Heritage Financial is currently generating about -0.01 per unit of risk. If you would invest  6,420  in Banner on September 28, 2024 and sell it today you would earn a total of  266.00  from holding Banner or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banner  vs.  Heritage Financial

Banner

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Heritage Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 6 (%) 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 Banner and Heritage Financial

The main advantage of trading using opposite Banner and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banner 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 Banner 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.