Correlation Between Heartland Financial and Business First

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

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

Diversification Opportunities for Heartland Financial and Business First

0.07

Correlation Coefficient

Heartland Financial  Business First

Significant diversification

The 3 months correlation between Heartland and Business is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares and Heartland 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 Heartland Financial USA are associated (or correlated) with Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Heartland Financial i.e., Heartland Financial and Business First go up and down completely randomly.

Pair Corralation between Heartland Financial and Business First

Given the investment horizon of 90 days Heartland Financial USA is expected to generate 0.74 times more return on investment than Business First. However, Heartland Financial USA is 1.36 times less risky than Business First. It trades about 0.17 of its potential returns per unit of risk. Business First Bancshares is currently generating about -0.03 per unit of risk. If you would invest  6,106  in Heartland Financial USA on December 30, 2024 and sell it today you would earn a total of  361.00  from holding Heartland Financial USA or generate 5.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	37.1%
Values	Daily Returns

Heartland Financial USA  vs.  Business First Bancshares

Heartland Financial USA

Risk-Adjusted Performance

Good

Over the last 90 days Heartland Financial USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak essential indicators, Heartland Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Business First Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Business First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Business First is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Heartland Financial and Business First

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

The idea behind Heartland Financial USA and Business First Bancshares 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.