Correlation Between Heartland Banccorp and Exchange Bank

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

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

Diversification Opportunities for Heartland Banccorp and Exchange Bank

-0.32

Correlation Coefficient

Heartland Banccorp  Exchange Bank

Very good diversification

The 3 months correlation between Heartland and Exchange is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Banccorp and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank and Heartland Banccorp 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 Heartland Banccorp are associated (or correlated) with Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of Heartland Banccorp i.e., Heartland Banccorp and Exchange Bank go up and down completely randomly.

Pair Corralation between Heartland Banccorp and Exchange Bank

Given the investment horizon of 90 days Heartland Banccorp is expected to generate 0.45 times more return on investment than Exchange Bank. However, Heartland Banccorp is 2.2 times less risky than Exchange Bank. It trades about 0.12 of its potential returns per unit of risk. Exchange Bank is currently generating about 0.04 per unit of risk. If you would invest  15,250  in Heartland Banccorp on December 21, 2024 and sell it today you would earn a total of  750.00  from holding Heartland Banccorp or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.46%
Values	Daily Returns

Heartland Banccorp  vs.  Exchange Bank

Heartland Banccorp

Risk-Adjusted Performance

OK

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 fragile basic indicators, Heartland Banccorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Exchange Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exchange Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Heartland Banccorp and Exchange Bank

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

The idea behind Heartland Banccorp and Exchange Bank 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.