Correlation Between HNB Finance and Amana Bank

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Can any of the company-specific risk be diversified away by investing in both HNB Finance and Amana 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 HNB Finance and Amana Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HNB Finance and Amana Bank, you can compare the effects of market volatilities on HNB Finance and Amana 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 HNB Finance with a short position of Amana Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNB Finance and Amana Bank.

Diversification Opportunities for HNB Finance and Amana Bank

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HNB and Amana is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HNB Finance and Amana Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Bank and HNB Finance 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 HNB Finance are associated (or correlated) with Amana Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Bank has no effect on the direction of HNB Finance i.e., HNB Finance and Amana Bank go up and down completely randomly.

Pair Corralation between HNB Finance and Amana Bank

Assuming the 90 days trading horizon HNB Finance is expected to under-perform the Amana Bank. In addition to that, HNB Finance is 4.18 times more volatile than Amana Bank. It trades about -0.03 of its total potential returns per unit of risk. Amana Bank is currently generating about 0.06 per unit of volatility. If you would invest  2,340  in Amana Bank on October 3, 2024 and sell it today you would earn a total of  80.00  from holding Amana Bank or generate 3.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

HNB Finance  vs.  Amana Bank

 Performance 
       Timeline  
HNB Finance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Amana Bank 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Amana Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Amana Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HNB Finance and Amana Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HNB Finance and Amana Bank

The main advantage of trading using opposite HNB Finance and Amana Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNB Finance position performs unexpectedly, Amana 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 Amana Bank will offset losses from the drop in Amana Bank's long position.
The idea behind HNB Finance and Amana Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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