Correlation Between Lake Shore and MidWestOne Financial
Can any of the company-specific risk be diversified away by investing in both Lake Shore and MidWestOne 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 Lake Shore and MidWestOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Shore Bancorp and MidWestOne Financial Group, you can compare the effects of market volatilities on Lake Shore and MidWestOne 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 Lake Shore with a short position of MidWestOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and MidWestOne Financial.
Diversification Opportunities for Lake Shore and MidWestOne Financial
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and MidWestOne is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and MidWestOne Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidWestOne Financial and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with MidWestOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidWestOne Financial has no effect on the direction of Lake Shore i.e., Lake Shore and MidWestOne Financial go up and down completely randomly.
Pair Corralation between Lake Shore and MidWestOne Financial
Given the investment horizon of 90 days Lake Shore is expected to generate 9.07 times less return on investment than MidWestOne Financial. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.82 times less risky than MidWestOne Financial. It trades about 0.04 of its potential returns per unit of risk. MidWestOne Financial Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,923 in MidWestOne Financial Group on August 28, 2024 and sell it today you would earn a total of 403.00 from holding MidWestOne Financial Group or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Lake Shore Bancorp vs. MidWestOne Financial Group
Performance |
| Timeline |
| Lake Shore Bancorp |
| MidWestOne Financial |
Lake Shore and MidWestOne Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and MidWestOne Financial
The main advantage of trading using opposite Lake Shore and MidWestOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, MidWestOne 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 MidWestOne Financial will offset losses from the drop in MidWestOne Financial's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| MidWestOne Financial vs. Home Federal Bancorp | MidWestOne Financial vs. Lake Shore Bancorp | MidWestOne Financial vs. Community West Bancshares | MidWestOne Financial vs. First Northwest Bancorp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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