Correlation Between Heritage Financial and International Business

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

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

Diversification Opportunities for Heritage Financial and International Business

-0.01

Correlation Coefficient

Heritage Financial  International Business

Good diversification

The 3 months correlation between Heritage and International is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Heritage Financial i.e., Heritage Financial and International Business go up and down completely randomly.

Pair Corralation between Heritage Financial and International Business

Given the investment horizon of 90 days Heritage Financial is expected to under-perform the International Business. In addition to that, Heritage Financial is 1.24 times more volatile than International Business Machines. It trades about -0.26 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.06 per unit of volatility. If you would invest  22,613  in International Business Machines on September 24, 2024 and sell it today you would lose (420.00) from holding International Business Machines or give up 1.86% of portfolio value over 90 days.

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

Heritage Financial  vs.  International Business Machine

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 inconsistent basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

International Business

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Heritage Financial and International Business

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

The idea behind Heritage Financial and International Business Machines 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.