Correlation Between Sterling Bancorp and HMN Financial

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

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

Diversification Opportunities for Sterling Bancorp and HMN Financial

0.37

Correlation Coefficient

Sterling Bancorp  HMN Financial

Weak diversification

The 3 months correlation between Sterling and HMN is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Bancorp and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Sterling Bancorp 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 Sterling Bancorp 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 Sterling Bancorp i.e., Sterling Bancorp and HMN Financial go up and down completely randomly.

Pair Corralation between Sterling Bancorp and HMN Financial

If you would invest  2,799  in HMN Financial on October 11, 2024 and sell it today you would earn a total of  0.00  from holding HMN Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.44%
Values	Daily Returns

Sterling Bancorp  vs.  HMN Financial

Sterling Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Sterling Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 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 Sterling Bancorp and HMN Financial

The main advantage of trading using opposite Sterling Bancorp and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Bancorp 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 Sterling Bancorp 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.