Correlation Between ChoiceOne Financial and Isabella Bank

Can any of the company-specific risk be diversified away by investing in both ChoiceOne Financial and Isabella Bank 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 ChoiceOne Financial and Isabella Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChoiceOne Financial Services and Isabella Bank, you can compare the effects of market volatilities on ChoiceOne Financial and Isabella Bank 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 ChoiceOne Financial with a short position of Isabella Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChoiceOne Financial and Isabella Bank.

Diversification Opportunities for ChoiceOne Financial and Isabella Bank

0.94

Correlation Coefficient

ChoiceOne Financial  Isabella Bank

Almost no diversification

The 3 months correlation between ChoiceOne and Isabella is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ChoiceOne Financial Services and Isabella Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isabella Bank and ChoiceOne Financial 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 ChoiceOne Financial Services are associated (or correlated) with Isabella Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isabella Bank has no effect on the direction of ChoiceOne Financial i.e., ChoiceOne Financial and Isabella Bank go up and down completely randomly.

Pair Corralation between ChoiceOne Financial and Isabella Bank

Given the investment horizon of 90 days ChoiceOne Financial Services is expected to under-perform the Isabella Bank. In addition to that, ChoiceOne Financial is 1.05 times more volatile than Isabella Bank. It trades about -0.25 of its total potential returns per unit of risk. Isabella Bank is currently generating about -0.1 per unit of volatility. If you would invest  2,567  in Isabella Bank on December 30, 2024 and sell it today you would lose (207.00) from holding Isabella Bank or give up 8.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ChoiceOne Financial Services  vs.  Isabella Bank

ChoiceOne Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChoiceOne Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Isabella Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Isabella Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ChoiceOne Financial and Isabella Bank

The main advantage of trading using opposite ChoiceOne Financial and Isabella Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChoiceOne Financial position performs unexpectedly, Isabella Bank 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 Isabella Bank will offset losses from the drop in Isabella Bank's long position.

The idea behind ChoiceOne Financial Services and Isabella Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.