Correlation Between North Dallas and Eastern Michigan
Can any of the company-specific risk be diversified away by investing in both North Dallas 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 North Dallas and Eastern Michigan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Dallas Bank and Eastern Michigan Financial, you can compare the effects of market volatilities on North Dallas 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 North Dallas with a short position of Eastern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Dallas and Eastern Michigan.
Diversification Opportunities for North Dallas and Eastern Michigan
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between North and Eastern is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding North Dallas Bank 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 North Dallas 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 North Dallas Bank 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 North Dallas i.e., North Dallas and Eastern Michigan go up and down completely randomly.
Pair Corralation between North Dallas and Eastern Michigan
Given the investment horizon of 90 days North Dallas Bank is expected to generate 0.22 times more return on investment than Eastern Michigan. However, North Dallas Bank is 4.58 times less risky than Eastern Michigan. It trades about 0.26 of its potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.05 per unit of risk. If you would invest 4,700 in North Dallas Bank on September 1, 2024 and sell it today you would earn a total of 75.00 from holding North Dallas Bank or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Dallas Bank vs. Eastern Michigan Financial
Performance |
| Timeline |
| North Dallas Bank |
| Eastern Michigan Fin |
North Dallas and Eastern Michigan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Dallas and Eastern Michigan
The main advantage of trading using opposite North Dallas and Eastern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Dallas 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.| North Dallas vs. CCSB Financial Corp | North Dallas vs. Delhi Bank Corp | North Dallas vs. Bank of Utica | North Dallas vs. First Community |
| Eastern Michigan vs. Bank Mandiri Persero | Eastern Michigan vs. Piraeus Bank SA | Eastern Michigan vs. Kasikornbank Public Co | Eastern Michigan vs. Turkiye Garanti Bankasi |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |