Correlation Between Heritage Financial and Banco De

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

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

Diversification Opportunities for Heritage Financial and Banco De

-0.84

Correlation Coefficient

Heritage Financial  Banco De

Pay attention - limited upside

The 3 months correlation between Heritage and Banco is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile and Heritage 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 Heritage Financial are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of Heritage Financial i.e., Heritage Financial and Banco De go up and down completely randomly.

Pair Corralation between Heritage Financial and Banco De

Given the investment horizon of 90 days Heritage Financial is expected to generate 14.28 times less return on investment than Banco De. But when comparing it to its historical volatility, Heritage Financial is 1.1 times less risky than Banco De. It trades about 0.01 of its potential returns per unit of risk. Banco De Chile is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,296  in Banco De Chile on September 14, 2024 and sell it today you would earn a total of  55.00  from holding Banco De Chile or generate 2.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Heritage Financial  vs.  Banco De Chile

Heritage Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 10 (%) 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.

Banco De Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco De Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Banco De is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Heritage Financial and Banco De

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

The idea behind Heritage Financial and Banco De Chile 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.