Correlation Between Killbuck Bancshares and HMN Financial

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

Diversification Opportunities for Killbuck Bancshares and HMN Financial

-0.2

Correlation Coefficient

Killbuck Bancshares  HMN Financial

Good diversification

The 3 months correlation between Killbuck and HMN is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Killbuck Bancshares and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Killbuck 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 Killbuck 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 Killbuck Bancshares i.e., Killbuck Bancshares and HMN Financial go up and down completely randomly.

Pair Corralation between Killbuck Bancshares and HMN Financial

Given the investment horizon of 90 days Killbuck Bancshares is expected to under-perform the HMN Financial. In addition to that, Killbuck Bancshares is 2.04 times more volatile than HMN Financial. It trades about -0.01 of its total potential returns per unit of risk. HMN Financial is currently generating about 0.04 per unit of volatility. If you would invest  2,105  in HMN Financial on October 4, 2024 and sell it today you would earn a total of  694.00  from holding HMN Financial or generate 32.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.5%
Values	Daily Returns

Killbuck Bancshares  vs.  HMN Financial

Killbuck Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Killbuck Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Killbuck Bancshares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

HMN Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Killbuck Bancshares and HMN Financial

The main advantage of trading using opposite Killbuck Bancshares and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Killbuck 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 Killbuck 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.