Correlation Between Southern Michigan and Heartland Banccorp

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

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

Diversification Opportunities for Southern Michigan and Heartland Banccorp

0.49

Correlation Coefficient

Southern Michigan  Heartland Banccorp

Very weak diversification

The 3 months correlation between Southern and Heartland is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Southern Michigan Bancorp and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp and Southern Michigan 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 Southern Michigan Bancorp are associated (or correlated) with Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Southern Michigan i.e., Southern Michigan and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Southern Michigan and Heartland Banccorp

If you would invest  16,000  in Heartland Banccorp on December 11, 2024 and sell it today you would earn a total of  0.00  from holding Heartland Banccorp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Southern Michigan Bancorp  vs.  Heartland Banccorp

Southern Michigan Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Michigan Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Southern Michigan is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Heartland Banccorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Southern Michigan and Heartland Banccorp

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

The idea behind Southern Michigan Bancorp and Heartland Banccorp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..