Correlation Between FS Bancorp and Eastern Michigan
Can any of the company-specific risk be diversified away by investing in both FS Bancorp and Eastern 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 FS Bancorp and Eastern Michigan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FS Bancorp and Eastern Michigan Financial, you can compare the effects of market volatilities on FS Bancorp and Eastern 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 FS Bancorp with a short position of Eastern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of FS Bancorp and Eastern Michigan.
Diversification Opportunities for FS Bancorp and Eastern Michigan
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FXLG and Eastern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FS Bancorp and Eastern Michigan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Michigan Fin and FS Bancorp 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 FS Bancorp are associated (or correlated) with Eastern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Michigan Fin has no effect on the direction of FS Bancorp i.e., FS Bancorp and Eastern Michigan go up and down completely randomly.
Pair Corralation between FS Bancorp and Eastern Michigan
Given the investment horizon of 90 days FS Bancorp is expected to generate 3.56 times less return on investment than Eastern Michigan. But when comparing it to its historical volatility, FS Bancorp is 4.08 times less risky than Eastern Michigan. It trades about 0.24 of its potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,165 in Eastern Michigan Financial on August 25, 2024 and sell it today you would earn a total of 376.00 from holding Eastern Michigan Financial or generate 11.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FS Bancorp vs. Eastern Michigan Financial
Performance |
| Timeline |
| FS Bancorp |
| Eastern Michigan Fin |
FS Bancorp and Eastern Michigan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FS Bancorp and Eastern Michigan
The main advantage of trading using opposite FS Bancorp and Eastern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FS Bancorp position performs unexpectedly, Eastern 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 Eastern Michigan will offset losses from the drop in Eastern Michigan's long position.| FS Bancorp vs. Standard Bank Group | FS Bancorp vs. PSB Holdings | FS Bancorp vs. United Overseas Bank | FS Bancorp vs. Turkiye Garanti Bankasi |
| Eastern Michigan vs. Commercial National Financial | Eastern Michigan vs. Mifflinburg Bancorp | Eastern Michigan vs. Apollo Bancorp | Eastern Michigan 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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