Correlation Between VersaBank and Heartland Financial

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

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

Diversification Opportunities for VersaBank and Heartland Financial

0.94

Correlation Coefficient

VersaBank  Heartland Financial

Almost no diversification

The 3 months correlation between VersaBank and Heartland is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA and VersaBank 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 VersaBank are associated (or correlated) with Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of VersaBank i.e., VersaBank and Heartland Financial go up and down completely randomly.

Pair Corralation between VersaBank and Heartland Financial

Given the investment horizon of 90 days VersaBank is expected to generate 0.87 times more return on investment than Heartland Financial. However, VersaBank is 1.15 times less risky than Heartland Financial. It trades about 0.23 of its potential returns per unit of risk. Heartland Financial USA is currently generating about 0.14 per unit of risk. If you would invest  1,338  in VersaBank on September 3, 2024 and sell it today you would earn a total of  461.00  from holding VersaBank or generate 34.45% return on investment over 90 days.

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

VersaBank  vs.  Heartland Financial USA

VersaBank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Heartland Financial USA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Heartland Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VersaBank and Heartland Financial

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

The idea behind VersaBank and Heartland Financial USA 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 Global Correlations module to find global opportunities by holding instruments from different markets.