Correlation Between Bank of San Francisco and Heartland Banccorp

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

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

Diversification Opportunities for Bank of San Francisco and Heartland Banccorp

0.66

Correlation Coefficient

Bank of San Francisco  Heartland Banccorp

Poor diversification

The 3 months correlation between Bank and Heartland is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of San and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp and Bank of San Francisco 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 Bank of San 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 Bank of San Francisco i.e., Bank of San Francisco and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Bank of San Francisco and Heartland Banccorp

Given the investment horizon of 90 days Bank of San Francisco is expected to generate 6.43 times less return on investment than Heartland Banccorp. But when comparing it to its historical volatility, Bank of San is 2.65 times less risky than Heartland Banccorp. It trades about 0.02 of its potential returns per unit of risk. Heartland Banccorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,367  in Heartland Banccorp on June 23, 2024 and sell it today you would earn a total of  6,433  from holding Heartland Banccorp or generate 76.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.43%
Values	Daily Returns

Bank of San  vs.  Heartland Banccorp

Bank of San Francisco

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of San are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Heartland Banccorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Banccorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Heartland Banccorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of San Francisco and Heartland Banccorp

The main advantage of trading using opposite Bank of San Francisco and Heartland Banccorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of San Francisco 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 Bank of San 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.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.