Correlation Between Middlefield Banc and FS Bancorp

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

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

Diversification Opportunities for Middlefield Banc and FS Bancorp

0.24

Correlation Coefficient

Middlefield Banc  FS Bancorp

Modest diversification

The 3 months correlation between Middlefield and FSBW is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp and Middlefield Banc 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 Middlefield Banc are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of Middlefield Banc i.e., Middlefield Banc and FS Bancorp go up and down completely randomly.

Pair Corralation between Middlefield Banc and FS Bancorp

Given the investment horizon of 90 days Middlefield Banc is expected to generate 1.41 times more return on investment than FS Bancorp. However, Middlefield Banc is 1.41 times more volatile than FS Bancorp. It trades about 0.0 of its potential returns per unit of risk. FS Bancorp is currently generating about -0.05 per unit of risk. If you would invest  2,785  in Middlefield Banc on December 29, 2024 and sell it today you would lose (47.00) from holding Middlefield Banc or give up 1.69% of portfolio value over 90 days.

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

Middlefield Banc  vs.  FS Bancorp

Middlefield Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Middlefield Banc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Middlefield Banc is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

FS Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Middlefield Banc and FS Bancorp

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

The idea behind Middlefield Banc and FS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.