Correlation Between HomeStreet and Heartland Financial

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

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

Diversification Opportunities for HomeStreet and Heartland Financial

-0.64

Correlation Coefficient

HomeStreet  Heartland Financial

Excellent diversification

The 3 months correlation between HomeStreet and Heartland is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HomeStreet and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA and HomeStreet 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 HomeStreet are associated (or correlated) with Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of HomeStreet i.e., HomeStreet and Heartland Financial go up and down completely randomly.

Pair Corralation between HomeStreet and Heartland Financial

Given the investment horizon of 90 days HomeStreet is expected to generate 1.02 times more return on investment than Heartland Financial. However, HomeStreet is 1.02 times more volatile than Heartland Financial USA. It trades about -0.15 of its potential returns per unit of risk. Heartland Financial USA is currently generating about -0.23 per unit of risk. If you would invest  1,188  in HomeStreet on September 30, 2024 and sell it today you would lose (72.00) from holding HomeStreet or give up 6.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

HomeStreet  vs.  Heartland Financial USA

HomeStreet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Heartland Financial USA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Heartland Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HomeStreet and Heartland Financial

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

The idea behind HomeStreet and Heartland Financial USA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.