Correlation Between HMN Financial and Banner

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

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

Diversification Opportunities for HMN Financial and Banner

0.28

Correlation Coefficient

HMN Financial  Banner

Modest diversification

The 3 months correlation between HMN and Banner is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and HMN 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 HMN Financial are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of HMN Financial i.e., HMN Financial and Banner go up and down completely randomly.

Pair Corralation between HMN Financial and Banner

If you would invest  2,799  in HMN Financial on October 10, 2024 and sell it today you would earn a total of  0.00  from holding HMN Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

HMN Financial  vs.  Banner

HMN Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Banner

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HMN Financial and Banner

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

The idea behind HMN Financial and Banner 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.