Correlation Between HMN Financial and Enterprise Financial

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

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

Diversification Opportunities for HMN Financial and Enterprise Financial

0.94

Correlation Coefficient

HMN Financial  Enterprise Financial

Almost no diversification

The 3 months correlation between HMN and Enterprise is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial 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 Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of HMN Financial i.e., HMN Financial and Enterprise Financial go up and down completely randomly.

Pair Corralation between HMN Financial and Enterprise Financial

Given the investment horizon of 90 days HMN Financial is expected to generate 1.23 times more return on investment than Enterprise Financial. However, HMN Financial is 1.23 times more volatile than Enterprise Financial Services. It trades about 0.09 of its potential returns per unit of risk. Enterprise Financial Services is currently generating about 0.09 per unit of risk. If you would invest  1,745  in HMN Financial on June 20, 2024 and sell it today you would earn a total of  906.00  from holding HMN Financial or generate 51.92% return on investment over 90 days.

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

HMN Financial  vs.  Enterprise Financial Services

HMN Financial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMN Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, HMN Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Enterprise Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Enterprise Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HMN Financial and Enterprise Financial

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

The idea behind HMN Financial and Enterprise 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.