Correlation Between Southern Michigan and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both Southern Michigan and Summit Bancshares 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 Summit Bancshares 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 Summit Bancshares, you can compare the effects of market volatilities on Southern Michigan and Summit Bancshares 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 Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Michigan and Summit Bancshares.
Diversification Opportunities for Southern Michigan and Summit Bancshares
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Summit is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southern Michigan Bancorp and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of Southern Michigan i.e., Southern Michigan and Summit Bancshares go up and down completely randomly.
Pair Corralation between Southern Michigan and Summit Bancshares
Given the investment horizon of 90 days Southern Michigan Bancorp is expected to generate 0.93 times more return on investment than Summit Bancshares. However, Southern Michigan Bancorp is 1.07 times less risky than Summit Bancshares. It trades about 0.1 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.02 per unit of risk. If you would invest 1,616 in Southern Michigan Bancorp on August 29, 2024 and sell it today you would earn a total of 259.00 from holding Southern Michigan Bancorp or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Southern Michigan Bancorp vs. Summit Bancshares
Performance |
| Timeline |
| Southern Michigan Bancorp |
| Summit Bancshares |
Southern Michigan and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Michigan and Summit Bancshares
The main advantage of trading using opposite Southern Michigan and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Michigan position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.| Southern Michigan vs. Invesco High Income | Southern Michigan vs. Blackrock Muniholdings Ny | Southern Michigan vs. Nuveen California Select | Southern Michigan vs. MFS Investment Grade |
| Summit Bancshares vs. Pioneer Bankcorp | Summit Bancshares vs. Liberty Northwest Bancorp | Summit Bancshares vs. First Community | Summit Bancshares vs. Coeur dAlene 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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