Correlation Between International Bancshares and HMN Financial

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

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

Diversification Opportunities for International Bancshares and HMN Financial

0.0

Correlation Coefficient

International Bancshares  HMN Financial

Pay attention - limited upside

The 3 months correlation between International and HMN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and International Bancshares 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 International Bancshares are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of International Bancshares i.e., International Bancshares and HMN Financial go up and down completely randomly.

Pair Corralation between International Bancshares and HMN Financial

If you would invest  6,279  in International Bancshares on December 30, 2024 and sell it today you would lose (7.00) from holding International Bancshares or give up 0.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

International Bancshares  vs.  HMN Financial

International Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, International Bancshares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HMN Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HMN Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Bancshares and HMN Financial

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

The idea behind International Bancshares and HMN 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.