Correlation Between Fentura Financial and Sturgis Bancorp

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

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

Diversification Opportunities for Fentura Financial and Sturgis Bancorp

-0.46

Correlation Coefficient

Fentura Financial  Sturgis Bancorp

Very good diversification

The 3 months correlation between Fentura and Sturgis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fentura Financial and Sturgis Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturgis Bancorp and Fentura 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 Fentura Financial are associated (or correlated) with Sturgis Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturgis Bancorp has no effect on the direction of Fentura Financial i.e., Fentura Financial and Sturgis Bancorp go up and down completely randomly.

Pair Corralation between Fentura Financial and Sturgis Bancorp

If you would invest  2,314  in Fentura Financial on October 5, 2024 and sell it today you would earn a total of  2,102  from holding Fentura Financial or generate 90.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.44%
Values	Daily Returns

Fentura Financial  vs.  Sturgis Bancorp

Fentura Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Sturgis Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sturgis Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Sturgis Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fentura Financial and Sturgis Bancorp

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

The idea behind Fentura Financial and Sturgis Bancorp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.