Correlation Between First Interstate and Heritage Financial
Can any of the company-specific risk be diversified away by investing in both First Interstate 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 First Interstate and Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Interstate BancSystem and Heritage Financial, you can compare the effects of market volatilities on First Interstate 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 First Interstate with a short position of Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and Heritage Financial.
Diversification Opportunities for First Interstate and Heritage Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Heritage is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial and First Interstate 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 First Interstate BancSystem 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 First Interstate i.e., First Interstate and Heritage Financial go up and down completely randomly.
Pair Corralation between First Interstate and Heritage Financial
Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 0.91 times more return on investment than Heritage Financial. However, First Interstate BancSystem is 1.1 times less risky than Heritage Financial. It trades about -0.17 of its potential returns per unit of risk. Heritage Financial is currently generating about -0.24 per unit of risk. If you would invest 3,450 in First Interstate BancSystem on October 5, 2024 and sell it today you would lose (203.00) from holding First Interstate BancSystem or give up 5.88% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
First Interstate BancSystem vs. Heritage Financial
Performance |
Timeline |
First Interstate Ban |
Heritage Financial |
First Interstate and Heritage Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Interstate and Heritage Financial
The main advantage of trading using opposite First Interstate and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate 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.First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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