Correlation Between Grand River and Independent Bank

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

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

Diversification Opportunities for Grand River and Independent Bank

-0.28

Correlation Coefficient

Grand River  Independent Bank

Very good diversification

The 3 months correlation between Grand and Independent is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Grand River Commerce and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and Grand River 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 Grand River Commerce are associated (or correlated) with Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Grand River i.e., Grand River and Independent Bank go up and down completely randomly.

Pair Corralation between Grand River and Independent Bank

Given the investment horizon of 90 days Grand River Commerce is expected to generate 1.1 times more return on investment than Independent Bank. However, Grand River is 1.1 times more volatile than Independent Bank. It trades about 0.29 of its potential returns per unit of risk. Independent Bank is currently generating about -0.1 per unit of risk. If you would invest  294.00  in Grand River Commerce on December 30, 2024 and sell it today you would earn a total of  106.00  from holding Grand River Commerce or generate 36.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Grand River Commerce  vs.  Independent Bank

Grand River Commerce

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

Independent Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Independent Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Grand River and Independent Bank

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

The idea behind Grand River Commerce and Independent 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.