Correlation Between Mainstreet Bank and Heartland Banccorp

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

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

Diversification Opportunities for Mainstreet Bank and Heartland Banccorp

0.31

Correlation Coefficient

Mainstreet Bank  Heartland Banccorp

Weak diversification

The 3 months correlation between Mainstreet and Heartland is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mainstreet Bank and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp and Mainstreet Bank 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 Mainstreet Bank are associated (or correlated) with Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Mainstreet Bank i.e., Mainstreet Bank and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Mainstreet Bank and Heartland Banccorp

Given the investment horizon of 90 days Mainstreet Bank is expected to generate 1.44 times less return on investment than Heartland Banccorp. In addition to that, Mainstreet Bank is 1.24 times more volatile than Heartland Banccorp. It trades about 0.07 of its total potential returns per unit of risk. Heartland Banccorp is currently generating about 0.12 per unit of volatility. If you would invest  14,339  in Heartland Banccorp on September 2, 2024 and sell it today you would earn a total of  2,111  from holding Heartland Banccorp or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Mainstreet Bank  vs.  Heartland Banccorp

Mainstreet Bank

Risk-Adjusted Performance

5 of 100

Modest

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

Heartland Banccorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Banccorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Heartland Banccorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mainstreet Bank and Heartland Banccorp

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

The idea behind Mainstreet Bank and Heartland Banccorp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.