Correlation Between Heartland Banccorp and Southern Michigan

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

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

Diversification Opportunities for Heartland Banccorp and Southern Michigan

0.59

Correlation Coefficient

Heartland Banccorp  Southern Michigan

Very weak diversification

The 3 months correlation between Heartland and Southern is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Banccorp and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp and Heartland Banccorp 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 Heartland Banccorp are associated (or correlated) with Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of Heartland Banccorp i.e., Heartland Banccorp and Southern Michigan go up and down completely randomly.

Pair Corralation between Heartland Banccorp and Southern Michigan

Given the investment horizon of 90 days Heartland Banccorp is expected to generate 1.63 times less return on investment than Southern Michigan. In addition to that, Heartland Banccorp is 2.94 times more volatile than Southern Michigan Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Southern Michigan Bancorp is currently generating about 0.22 per unit of volatility. If you would invest  1,735  in Southern Michigan Bancorp on October 10, 2024 and sell it today you would earn a total of  190.00  from holding Southern Michigan Bancorp or generate 10.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Heartland Banccorp  vs.  Southern Michigan Bancorp

Heartland Banccorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Banccorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Heartland Banccorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Southern Michigan Bancorp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Michigan Bancorp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Southern Michigan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Heartland Banccorp and Southern Michigan

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

The idea behind Heartland Banccorp and Southern Michigan 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.