Correlation Between HMN Financial and CNB

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

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

Diversification Opportunities for HMN Financial and CNB

-0.45

Correlation Coefficient

HMN Financial  CNB

Very good diversification

The 3 months correlation between HMN and CNB is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and CNB Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Corporation 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 CNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Corporation has no effect on the direction of HMN Financial i.e., HMN Financial and CNB go up and down completely randomly.

Pair Corralation between HMN Financial and CNB

Given the investment horizon of 90 days HMN Financial is expected to under-perform the CNB. In addition to that, HMN Financial is 2.11 times more volatile than CNB Corporation. It trades about -0.13 of its total potential returns per unit of risk. CNB Corporation is currently generating about -0.11 per unit of volatility. If you would invest  1,881  in CNB Corporation on October 4, 2024 and sell it today you would lose (81.00) from holding CNB Corporation or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	8.06%
Values	Daily Returns

HMN Financial  vs.  CNB Corp.

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CNB Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNB Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, CNB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HMN Financial and CNB

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

The idea behind HMN Financial and CNB Corporation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.