Correlation Between HMN Financial and Farmers
Can any of the company-specific risk be diversified away by investing in both HMN Financial and Farmers 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 Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMN Financial and Farmers and Merchants, you can compare the effects of market volatilities on HMN Financial and Farmers 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 Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMN Financial and Farmers.
Diversification Opportunities for HMN Financial and Farmers
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between HMN and Farmers is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Farmers and Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers and Merchants 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 Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers and Merchants has no effect on the direction of HMN Financial i.e., HMN Financial and Farmers go up and down completely randomly.
Pair Corralation between HMN Financial and Farmers
Given the investment horizon of 90 days HMN Financial is expected to under-perform the Farmers. But the stock apears to be less risky and, when comparing its historical volatility, HMN Financial is 1.17 times less risky than Farmers. The stock trades about -0.12 of its potential returns per unit of risk. The Farmers and Merchants is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,700 in Farmers and Merchants on January 21, 2024 and sell it today you would lose (53.00) from holding Farmers and Merchants or give up 3.12% 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. Farmers and Merchants
Performance |
| Timeline |
| HMN Financial |
| Farmers and Merchants |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
HMN Financial and Farmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMN Financial and Farmers
The main advantage of trading using opposite HMN Financial and Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMN Financial position performs unexpectedly, Farmers 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 Farmers will offset losses from the drop in Farmers' long position.| HMN Financial vs. Home Federal Bancorp | HMN Financial vs. Community West Bancshares | HMN Financial vs. First Financial Northwest | HMN Financial vs. First Northwest Bancorp |
| Farmers vs. National Capital Bank | Farmers vs. Citizens Financial Corp | Farmers vs. Bank of Idaho | Farmers vs. Community Heritage Financial |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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