Correlation Between HMN Financial and PT Bank

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

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

Diversification Opportunities for HMN Financial and PT Bank

-0.43

Correlation Coefficient

HMN Financial  PT Bank

Very good diversification

The 3 months correlation between HMN and BKRKF is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of HMN Financial i.e., HMN Financial and PT Bank go up and down completely randomly.

Pair Corralation between HMN Financial and PT Bank

Given the investment horizon of 90 days HMN Financial is expected to generate 0.41 times more return on investment than PT Bank. However, HMN Financial is 2.47 times less risky than PT Bank. It trades about 0.04 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.01 per unit of risk. If you would invest  2,142  in HMN Financial on October 3, 2024 and sell it today you would earn a total of  657.00  from holding HMN Financial or generate 30.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.75%
Values	Daily Returns

HMN Financial  vs.  PT Bank Rakyat

HMN Financial

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, HMN Financial reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HMN Financial and PT Bank

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

The idea behind HMN Financial and PT Bank Rakyat 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.