Correlation Between Heritage Commerce and Lakeland Financial

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

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

Diversification Opportunities for Heritage Commerce and Lakeland Financial

0.97

Correlation Coefficient

Heritage Commerce  Lakeland Financial

Almost no diversification

The 3 months correlation between Heritage and Lakeland is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and Lakeland Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Financial and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with Lakeland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Financial has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and Lakeland Financial go up and down completely randomly.

Pair Corralation between Heritage Commerce and Lakeland Financial

Given the investment horizon of 90 days Heritage Commerce is expected to generate 1.65 times less return on investment than Lakeland Financial. But when comparing it to its historical volatility, Heritage Commerce Corp is 1.07 times less risky than Lakeland Financial. It trades about 0.05 of its potential returns per unit of risk. Lakeland Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,596  in Lakeland Financial on September 16, 2024 and sell it today you would earn a total of  680.00  from holding Lakeland Financial or generate 10.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Heritage Commerce Corp  vs.  Lakeland Financial

Heritage Commerce Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Commerce Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Heritage Commerce may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lakeland Financial

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Heritage Commerce and Lakeland Financial

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

The idea behind Heritage Commerce Corp and Lakeland Financial 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.