Correlation Between HMN Financial and Cullman Bancorp

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

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

Diversification Opportunities for HMN Financial and Cullman Bancorp

0.35

Correlation Coefficient

HMN Financial  Cullman Bancorp

Weak diversification

The 3 months correlation between HMN and Cullman is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and Cullman Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullman Bancorp 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 Cullman Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullman Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and Cullman Bancorp go up and down completely randomly.

Pair Corralation between HMN Financial and Cullman Bancorp

Given the investment horizon of 90 days HMN Financial is expected to under-perform the Cullman Bancorp. In addition to that, HMN Financial is 1.54 times more volatile than Cullman Bancorp. It trades about -0.15 of its total potential returns per unit of risk. Cullman Bancorp is currently generating about 0.18 per unit of volatility. If you would invest  1,017  in Cullman Bancorp on February 1, 2024 and sell it today you would earn a total of  30.00  from holding Cullman Bancorp or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

HMN Financial  vs.  Cullman Bancorp

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cullman Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cullman Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Cullman Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HMN Financial and Cullman Bancorp

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

The idea behind HMN Financial and Cullman Bancorp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.