Correlation Between Banco Macro and HMN Financial

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

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

Diversification Opportunities for Banco Macro and HMN Financial

0.01

Correlation Coefficient

Banco Macro  HMN Financial

Significant diversification

The 3 months correlation between Banco and HMN is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Banco Macro 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 Banco Macro SA are associated (or correlated) with HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Banco Macro i.e., Banco Macro and HMN Financial go up and down completely randomly.

Pair Corralation between Banco Macro and HMN Financial

Considering the 90-day investment horizon Banco Macro SA is expected to generate 0.84 times more return on investment than HMN Financial. However, Banco Macro SA is 1.19 times less risky than HMN Financial. It trades about 0.4 of its potential returns per unit of risk. HMN Financial is currently generating about 0.18 per unit of risk. If you would invest  4,809  in Banco Macro SA on February 17, 2024 and sell it today you would earn a total of  1,696  from holding Banco Macro SA or generate 35.27% return on investment over 90 days.

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

Banco Macro SA  vs.  HMN Financial

Banco Macro SA

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

HMN Financial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HMN Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, HMN Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Macro and HMN Financial

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

The idea behind Banco Macro SA and HMN 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..