Correlation Between Solvay Bank and Eastern Michigan
Can any of the company-specific risk be diversified away by investing in both Solvay Bank 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 Solvay Bank and Eastern Michigan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay Bank Corp and Eastern Michigan Financial, you can compare the effects of market volatilities on Solvay Bank 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 Solvay Bank with a short position of Eastern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay Bank and Eastern Michigan.
Diversification Opportunities for Solvay Bank and Eastern Michigan
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Solvay and Eastern is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Solvay Bank Corp 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 Solvay Bank 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 Solvay Bank Corp 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 Solvay Bank i.e., Solvay Bank and Eastern Michigan go up and down completely randomly.
Pair Corralation between Solvay Bank and Eastern Michigan
Given the investment horizon of 90 days Solvay Bank Corp is expected to under-perform the Eastern Michigan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Solvay Bank Corp is 1.18 times less risky than Eastern Michigan. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Eastern Michigan Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,450 in Eastern Michigan Financial on August 29, 2024 and sell it today you would earn a total of 75.00 from holding Eastern Michigan Financial or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Solvay Bank Corp vs. Eastern Michigan Financial
Performance |
| Timeline |
| Solvay Bank Corp |
| Eastern Michigan Fin |
Solvay Bank and Eastern Michigan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay Bank and Eastern Michigan
The main advantage of trading using opposite Solvay Bank and Eastern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay Bank 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.| Solvay Bank vs. Invesco High Income | Solvay Bank vs. Blackrock Muniholdings Ny | Solvay Bank vs. Nuveen California Select | Solvay Bank vs. MFS Investment Grade |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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