Correlation Between Southern Michigan and FS Bancorp
Can any of the company-specific risk be diversified away by investing in both Southern Michigan and FS Bancorp 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 Southern Michigan and FS Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Michigan Bancorp and FS Bancorp, you can compare the effects of market volatilities on Southern Michigan and FS Bancorp 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 Southern Michigan with a short position of FS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Michigan and FS Bancorp.
Diversification Opportunities for Southern Michigan and FS Bancorp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and FXLG is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Southern Michigan Bancorp and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp and Southern 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 Southern Michigan Bancorp are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of Southern Michigan i.e., Southern Michigan and FS Bancorp go up and down completely randomly.
Pair Corralation between Southern Michigan and FS Bancorp
Given the investment horizon of 90 days Southern Michigan is expected to generate 2.28 times less return on investment than FS Bancorp. In addition to that, Southern Michigan is 1.45 times more volatile than FS Bancorp. It trades about 0.03 of its total potential returns per unit of risk. FS Bancorp is currently generating about 0.1 per unit of volatility. If you would invest 2,536 in FS Bancorp on September 12, 2024 and sell it today you would earn a total of 644.00 from holding FS Bancorp or generate 25.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 77.86% |
| Values | Daily Returns |
Southern Michigan Bancorp vs. FS Bancorp
Performance |
| Timeline |
| Southern Michigan Bancorp |
| FS Bancorp |
Southern Michigan and FS Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Michigan and FS Bancorp
The main advantage of trading using opposite Southern Michigan and FS Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Michigan position performs unexpectedly, FS Bancorp 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 FS Bancorp will offset losses from the drop in FS Bancorp's long position.| Southern Michigan vs. FS Bancorp | Southern Michigan vs. Eastern Michigan Financial | Southern Michigan vs. Grand River Commerce | Southern Michigan vs. Bank of Botetourt |
| FS Bancorp vs. PT Bank Rakyat | FS Bancorp vs. Morningstar Unconstrained Allocation | FS Bancorp vs. Bondbloxx ETF Trust | FS Bancorp vs. Spring Valley Acquisition |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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