Correlation Between Columbia Banking and Heritage Financial

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

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

Diversification Opportunities for Columbia Banking and Heritage Financial

0.94

Correlation Coefficient

Columbia Banking  Heritage Financial

Almost no diversification

The 3 months correlation between Columbia and Heritage is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Banking System and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and Columbia Banking 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 Columbia Banking System 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 Columbia Banking i.e., Columbia Banking and Heritage Financial go up and down completely randomly.

Pair Corralation between Columbia Banking and Heritage Financial

Given the investment horizon of 90 days Columbia Banking System is expected to generate 1.25 times more return on investment than Heritage Financial. However, Columbia Banking is 1.25 times more volatile than Heritage Financial. It trades about 0.02 of its potential returns per unit of risk. Heritage Financial is currently generating about 0.0 per unit of risk. If you would invest  2,570  in Columbia Banking System on September 28, 2024 and sell it today you would earn a total of  180.00  from holding Columbia Banking System or generate 7.0% return on investment over 90 days.

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

Columbia Banking System  vs.  Heritage Financial

Columbia Banking System

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Banking System are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Columbia Banking may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Columbia Banking and Heritage Financial

The main advantage of trading using opposite Columbia Banking and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Banking 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 Columbia Banking System 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.