Correlation Between Bancorp and Heartland Financial

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

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

Diversification Opportunities for Bancorp and Heartland Financial

-0.28

Correlation Coefficient

Bancorp  Heartland Financial

Very good diversification

The 3 months correlation between Bancorp and Heartland is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Bancorp 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 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 The Bancorp 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 Bancorp i.e., Bancorp and Heartland Financial go up and down completely randomly.

Pair Corralation between Bancorp and Heartland Financial

Given the investment horizon of 90 days The Bancorp is expected to under-perform the Heartland Financial. In addition to that, Bancorp is 1.06 times more volatile than Heartland Financial USA. It trades about -0.12 of its total potential returns per unit of risk. Heartland Financial USA is currently generating about 0.17 per unit of volatility. If you would invest  3,386  in Heartland Financial USA on March 4, 2024 and sell it today you would earn a total of  1,010  from holding Heartland Financial USA or generate 29.83% return on investment over 90 days.

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

The Bancorp  vs.  Heartland Financial USA

Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Heartland Financial USA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 13 (%) 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 Bancorp and Heartland Financial

The main advantage of trading using opposite Bancorp and Heartland Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancorp 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 The Bancorp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.