Correlation Between Exchange Bank and Heartland Banccorp

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

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

Diversification Opportunities for Exchange Bank and Heartland Banccorp

-0.67

Correlation Coefficient

Exchange Bank  Heartland Banccorp

Excellent diversification

The 3 months correlation between Exchange and Heartland is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bank and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp and Exchange Bank 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 Exchange Bank are associated (or correlated) with Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Exchange Bank i.e., Exchange Bank and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Exchange Bank and Heartland Banccorp

Given the investment horizon of 90 days Exchange Bank is expected to generate 2.1 times more return on investment than Heartland Banccorp. However, Exchange Bank is 2.1 times more volatile than Heartland Banccorp. It trades about 0.0 of its potential returns per unit of risk. Heartland Banccorp is currently generating about -0.03 per unit of risk. If you would invest  11,069  in Exchange Bank on December 11, 2024 and sell it today you would lose (269.00) from holding Exchange Bank or give up 2.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	57.63%
Values	Daily Returns

Exchange Bank  vs.  Heartland Banccorp

Exchange Bank

Risk-Adjusted Performance

Weak

Over the last 90 days Exchange Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Exchange Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Heartland Banccorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Banccorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Heartland Banccorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exchange Bank and Heartland Banccorp

The main advantage of trading using opposite Exchange Bank and Heartland Banccorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Bank position performs unexpectedly, Heartland Banccorp 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 Heartland Banccorp will offset losses from the drop in Heartland Banccorp's long position.

The idea behind Exchange Bank and Heartland Banccorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.