Correlation Between First Republic and Heartland Financial

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

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

Diversification Opportunities for First Republic and Heartland Financial

-0.68

Correlation Coefficient

First Republic  Heartland Financial

Excellent diversification

The 3 months correlation between First and Heartland is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA and First Republic 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 First Republic Bank are associated (or correlated) with Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of First Republic i.e., First Republic and Heartland Financial go up and down completely randomly.

Pair Corralation between First Republic and Heartland Financial

If you would invest  2,434  in Heartland Financial USA on August 9, 2024 and sell it today you would earn a total of  84.00  from holding Heartland Financial USA or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.81%
Values	Daily Returns

First Republic Bank  vs.  Heartland Financial USA

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Heartland Financial USA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Financial USA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Heartland Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Republic and Heartland Financial

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

The idea behind First Republic Bank and Heartland Financial USA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.