Correlation Between Eastern Michigan and Commercial National
Can any of the company-specific risk be diversified away by investing in both Eastern Michigan and Commercial National 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 Eastern Michigan and Commercial National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Michigan Financial and Commercial National Financial, you can compare the effects of market volatilities on Eastern Michigan and Commercial National 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 Eastern Michigan with a short position of Commercial National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Michigan and Commercial National.
Diversification Opportunities for Eastern Michigan and Commercial National
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Commercial is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Michigan Financial and Commercial National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial National and Eastern Michigan 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 Eastern Michigan Financial are associated (or correlated) with Commercial National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial National has no effect on the direction of Eastern Michigan i.e., Eastern Michigan and Commercial National go up and down completely randomly.
Pair Corralation between Eastern Michigan and Commercial National
Given the investment horizon of 90 days Eastern Michigan Financial is expected to generate 0.93 times more return on investment than Commercial National. However, Eastern Michigan Financial is 1.07 times less risky than Commercial National. It trades about 0.1 of its potential returns per unit of risk. Commercial National Financial is currently generating about 0.08 per unit of risk. If you would invest 3,450 in Eastern Michigan Financial on August 25, 2024 and sell it today you would earn a total of 91.00 from holding Eastern Michigan Financial or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Michigan Financial vs. Commercial National Financial
Performance |
| Timeline |
| Eastern Michigan Fin |
| Commercial National |
Eastern Michigan and Commercial National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Michigan and Commercial National
The main advantage of trading using opposite Eastern Michigan and Commercial National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Michigan position performs unexpectedly, Commercial National 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 Commercial National will offset losses from the drop in Commercial National's long position.| Eastern Michigan vs. Commercial National Financial | Eastern Michigan vs. Mifflinburg Bancorp | Eastern Michigan vs. Apollo Bancorp | Eastern Michigan vs. Community Bankers |
| Commercial National vs. Eastern Michigan Financial | Commercial National vs. Mifflinburg Bancorp | Commercial National vs. Apollo Bancorp | Commercial National vs. Community Bankers |
Check out your portfolio center.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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