Correlation Between Heartland Banccorp and Prime Meridian

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

By analyzing existing cross correlation between Heartland Banccorp and Prime Meridian Holding, you can compare the effects of market volatilities on Heartland Banccorp and Prime Meridian 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 Prime Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Banccorp and Prime Meridian.

Diversification Opportunities for Heartland Banccorp and Prime Meridian

-0.59

Correlation Coefficient

Heartland Banccorp  Prime Meridian

Excellent diversification

The 3 months correlation between Heartland and Prime is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Banccorp and Prime Meridian Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian Holding 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Holding has no effect on the direction of Heartland Banccorp i.e., Heartland Banccorp and Prime Meridian go up and down completely randomly.

Pair Corralation between Heartland Banccorp and Prime Meridian

Given the investment horizon of 90 days Heartland Banccorp is expected to generate 0.89 times more return on investment than Prime Meridian. However, Heartland Banccorp is 1.13 times less risky than Prime Meridian. It trades about 0.12 of its potential returns per unit of risk. Prime Meridian Holding is currently generating about -0.05 per unit of risk. If you would invest  15,327  in Heartland Banccorp on December 29, 2024 and sell it today you would earn a total of  673.00  from holding Heartland Banccorp or generate 4.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	39.34%
Values	Daily Returns

Heartland Banccorp  vs.  Prime Meridian Holding

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.

Prime Meridian Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Meridian Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Prime Meridian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heartland Banccorp and Prime Meridian

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

The idea behind Heartland Banccorp and Prime Meridian Holding 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.