Correlation Between Eastern Michigan and Southern Michigan
Can any of the company-specific risk be diversified away by investing in both Eastern Michigan and Southern Michigan 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 Southern Michigan 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 Southern Michigan Bancorp, you can compare the effects of market volatilities on Eastern Michigan and Southern Michigan 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 Southern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Michigan and Southern Michigan.
Diversification Opportunities for Eastern Michigan and Southern Michigan
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Southern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Michigan Financial and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp 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 Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of Eastern Michigan i.e., Eastern Michigan and Southern Michigan go up and down completely randomly.
Pair Corralation between Eastern Michigan and Southern Michigan
Given the investment horizon of 90 days Eastern Michigan is expected to generate 1.1 times less return on investment than Southern Michigan. In addition to that, Eastern Michigan is 1.37 times more volatile than Southern Michigan Bancorp. It trades about 0.14 of its total potential returns per unit of risk. Southern Michigan Bancorp is currently generating about 0.21 per unit of volatility. If you would invest 1,716 in Southern Michigan Bancorp on September 12, 2024 and sell it today you would earn a total of 209.00 from holding Southern Michigan Bancorp or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Eastern Michigan Financial vs. Southern Michigan Bancorp
Performance |
| Timeline |
| Eastern Michigan Fin |
| Southern Michigan Bancorp |
Eastern Michigan and Southern Michigan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Michigan and Southern Michigan
The main advantage of trading using opposite Eastern Michigan and Southern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Michigan position performs unexpectedly, Southern Michigan 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 Southern Michigan will offset losses from the drop in Southern Michigan's long position.| Eastern Michigan vs. PT Bank Rakyat | Eastern Michigan vs. Morningstar Unconstrained Allocation | Eastern Michigan vs. Bondbloxx ETF Trust | Eastern Michigan vs. Spring Valley Acquisition |
| Southern Michigan vs. FS Bancorp | Southern Michigan vs. Eastern Michigan Financial | Southern Michigan vs. Grand River Commerce | Southern Michigan vs. Bank of Botetourt |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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