Correlation Between Heartland Financial and Dime Community

Can any of the company-specific risk be diversified away by investing in both Heartland Financial and Dime Community 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 Dime Community 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 Dime Community Bancshares, you can compare the effects of market volatilities on Heartland Financial and Dime Community 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 Dime Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Financial and Dime Community.

Diversification Opportunities for Heartland Financial and Dime Community

0.38

Correlation Coefficient

Heartland Financial  Dime Community

Weak diversification

The 3 months correlation between Heartland and Dime is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community 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 Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of Heartland Financial i.e., Heartland Financial and Dime Community go up and down completely randomly.

Pair Corralation between Heartland Financial and Dime Community

Assuming the 90 days horizon Heartland Financial is expected to generate 3.84 times less return on investment than Dime Community. But when comparing it to its historical volatility, Heartland Financial USA is 2.67 times less risky than Dime Community. It trades about 0.09 of its potential returns per unit of risk. Dime Community Bancshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,830  in Dime Community Bancshares on September 4, 2024 and sell it today you would earn a total of  160.00  from holding Dime Community Bancshares or generate 8.74% return on investment over 90 days.

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

Heartland Financial USA  vs.  Dime Community Bancshares

Heartland Financial USA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Heartland Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Dime Community Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Dime Community may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heartland Financial and Dime Community

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

The idea behind Heartland Financial USA and Dime Community 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.