Correlation Between HMN Financial and Banco De

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

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

Diversification Opportunities for HMN Financial and Banco De

-0.4

Correlation Coefficient

HMN Financial  Banco De

Very good diversification

The 3 months correlation between HMN and Banco is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of HMN Financial i.e., HMN Financial and Banco De go up and down completely randomly.

Pair Corralation between HMN Financial and Banco De

Given the investment horizon of 90 days HMN Financial is expected to under-perform the Banco De. But the stock apears to be less risky and, when comparing its historical volatility, HMN Financial is 1.06 times less risky than Banco De. The stock trades about -0.15 of its potential returns per unit of risk. The Banco De Chile is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,203  in Banco De Chile on January 31, 2024 and sell it today you would earn a total of  5.00  from holding Banco De Chile or generate 0.23% return on investment over 90 days.

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

HMN Financial  vs.  Banco De Chile

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Banco De Chile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental indicators, Banco De may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with HMN Financial and Banco De

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

The idea behind HMN Financial and Banco De Chile 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.