Correlation Between Huntington Bancshares and HMN Financial

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

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

Diversification Opportunities for Huntington Bancshares and HMN Financial

-0.41

Correlation Coefficient

Huntington Bancshares  HMN Financial

Very good diversification

The 3 months correlation between Huntington and HMN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Bancshares Incorpor and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial and Huntington Bancshares 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 Huntington Bancshares Incorporated 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 Huntington Bancshares i.e., Huntington Bancshares and HMN Financial go up and down completely randomly.

Pair Corralation between Huntington Bancshares and HMN Financial

Given the investment horizon of 90 days Huntington Bancshares Incorporated is expected to generate 0.88 times more return on investment than HMN Financial. However, Huntington Bancshares Incorporated is 1.14 times less risky than HMN Financial. It trades about 0.06 of its potential returns per unit of risk. HMN Financial is currently generating about -0.06 per unit of risk. If you would invest  1,337  in Huntington Bancshares Incorporated on February 6, 2024 and sell it today you would earn a total of  43.00  from holding Huntington Bancshares Incorporated or generate 3.22% return on investment over 90 days.

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

Huntington Bancshares Incorpor  vs.  HMN Financial

Huntington Bancshares

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Bancshares Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Huntington Bancshares displayed solid returns over the last few months and may actually be approaching a breakup point.

HMN Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMN Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Huntington Bancshares and HMN Financial

The main advantage of trading using opposite Huntington Bancshares and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntington Bancshares 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 Huntington Bancshares Incorporated 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.