Correlation Between Eastern Michigan and Grand River

Can any of the company-specific risk be diversified away by investing in both Eastern Michigan and Grand River 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 Eastern Michigan and Grand River into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastern Michigan Financial and Grand River Commerce, you can compare the effects of market volatilities on Eastern Michigan and Grand River 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 Eastern Michigan with a short position of Grand River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Michigan and Grand River.

Diversification Opportunities for Eastern Michigan and Grand River

-0.36

Correlation Coefficient

Eastern Michigan  Grand River

Very good diversification

The 3 months correlation between Eastern and Grand is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Michigan Financial and Grand River Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand River Commerce and Eastern 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 Eastern Michigan Financial are associated (or correlated) with Grand River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand River Commerce has no effect on the direction of Eastern Michigan i.e., Eastern Michigan and Grand River go up and down completely randomly.

Pair Corralation between Eastern Michigan and Grand River

Given the investment horizon of 90 days Eastern Michigan Financial is expected to generate 0.95 times more return on investment than Grand River. However, Eastern Michigan Financial is 1.05 times less risky than Grand River. It trades about 0.13 of its potential returns per unit of risk. Grand River Commerce is currently generating about -0.01 per unit of risk. If you would invest  2,260  in Eastern Michigan Financial on September 4, 2024 and sell it today you would earn a total of  1,290  from holding Eastern Michigan Financial or generate 57.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.09%
Values	Daily Returns

Eastern Michigan Financial  vs.  Grand River Commerce

Eastern Michigan Fin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Eastern Michigan displayed solid returns over the last few months and may actually be approaching a breakup point.

Grand River Commerce

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Grand River is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eastern Michigan and Grand River

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

The idea behind Eastern Michigan Financial and Grand River Commerce 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.