Correlation Between HMN Financial and Community Bank

Can any of the company-specific risk be diversified away by investing in both HMN Financial and Community 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 Community 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 Community Bank System, you can compare the effects of market volatilities on HMN Financial and Community 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 Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Community Bank.

Diversification Opportunities for HMN Financial and Community Bank

0.0

Correlation Coefficient

HMN Financial  Community Bank

Pay attention - limited upside

The 3 months correlation between HMN and Community is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of HMN Financial i.e., HMN Financial and Community Bank go up and down completely randomly.

Pair Corralation between HMN Financial and Community Bank

If you would invest (100.00) in HMN Financial on December 28, 2024 and sell it today you would earn a total of  100.00  from holding HMN Financial or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

HMN Financial  vs.  Community Bank System

HMN Financial

Risk-Adjusted Performance

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.

Community Bank System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Bank System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Community Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HMN Financial and Community Bank

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

The idea behind HMN Financial and Community Bank System 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.