Correlation Between HMN Financial and Regions Financial

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

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

Diversification Opportunities for HMN Financial and Regions Financial

-0.17

Correlation Coefficient

HMN Financial  Regions Financial

Good diversification

The 3 months correlation between HMN and Regions is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial and HMN Financial 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 HMN Financial are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of HMN Financial i.e., HMN Financial and Regions Financial go up and down completely randomly.

Pair Corralation between HMN Financial and Regions Financial

Given the investment horizon of 90 days HMN Financial is expected to under-perform the Regions Financial. But the stock apears to be less risky and, when comparing its historical volatility, HMN Financial is 1.17 times less risky than Regions Financial. The stock trades about -0.2 of its potential returns per unit of risk. The Regions Financial is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,023  in Regions Financial on February 3, 2024 and sell it today you would lose (59.00) from holding Regions Financial or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HMN Financial  vs.  Regions Financial

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Regions Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with HMN Financial and Regions Financial

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

The idea behind HMN Financial and Regions 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.