Correlation Between Heritage Financial and Franklin Financial

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

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

Diversification Opportunities for Heritage Financial and Franklin Financial

-0.13

Correlation Coefficient

Heritage Financial  Franklin Financial

Good diversification

The 3 months correlation between Heritage and Franklin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Financial and Heritage 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 Heritage Financial are associated (or correlated) with Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of Heritage Financial i.e., Heritage Financial and Franklin Financial go up and down completely randomly.

Pair Corralation between Heritage Financial and Franklin Financial

Given the investment horizon of 90 days Heritage Financial is expected to under-perform the Franklin Financial. In addition to that, Heritage Financial is 1.02 times more volatile than Franklin Financial Services. It trades about -0.04 of its total potential returns per unit of risk. Franklin Financial Services is currently generating about 0.04 per unit of volatility. If you would invest  2,562  in Franklin Financial Services on March 8, 2024 and sell it today you would earn a total of  55.00  from holding Franklin Financial Services or generate 2.15% return on investment over 90 days.

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

Heritage Financial  vs.  Franklin Financial Services

Heritage Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Franklin Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Franklin Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heritage Financial and Franklin Financial

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

The idea behind Heritage Financial and Franklin Financial Services 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.