Correlation Between Prime Meridian and Fentura Financial

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Can any of the company-specific risk be diversified away by investing in both Prime Meridian and Fentura Financial 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 Prime Meridian and Fentura Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Meridian Holding and Fentura Financial, you can compare the effects of market volatilities on Prime Meridian and Fentura Financial 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 Prime Meridian with a short position of Fentura Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Meridian and Fentura Financial.

Diversification Opportunities for Prime Meridian and Fentura Financial

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Prime and Fentura is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Holding and Fentura Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fentura Financial and Prime Meridian 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 Prime Meridian Holding are associated (or correlated) with Fentura Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fentura Financial has no effect on the direction of Prime Meridian i.e., Prime Meridian and Fentura Financial go up and down completely randomly.

Pair Corralation between Prime Meridian and Fentura Financial

Given the investment horizon of 90 days Prime Meridian is expected to generate 1.04 times less return on investment than Fentura Financial. But when comparing it to its historical volatility, Prime Meridian Holding is 1.18 times less risky than Fentura Financial. It trades about 0.18 of its potential returns per unit of risk. Fentura Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,885  in Fentura Financial on September 16, 2024 and sell it today you would earn a total of  725.00  from holding Fentura Financial or generate 18.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Prime Meridian Holding  vs.  Fentura Financial

 Performance 
       Timeline  
Prime Meridian Holding 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Prime Meridian reported solid returns over the last few months and may actually be approaching a breakup point.
Fentura Financial 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 12 (%) 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.

Prime Meridian and Fentura Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prime Meridian and Fentura Financial

The main advantage of trading using opposite Prime Meridian and Fentura Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Meridian position performs unexpectedly, Fentura Financial 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 Fentura Financial will offset losses from the drop in Fentura Financial's long position.
The idea behind Prime Meridian Holding and Fentura Financial 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.
Check out your portfolio center.
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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