Correlation Between Southern Michigan and Sturgis Bancorp

Can any of the company-specific risk be diversified away by investing in both Southern Michigan and Sturgis 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 Southern Michigan and Sturgis Bancorp 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 Sturgis Bancorp, you can compare the effects of market volatilities on Southern Michigan and Sturgis 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 Southern Michigan with a short position of Sturgis Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Michigan and Sturgis Bancorp.

Diversification Opportunities for Southern Michigan and Sturgis Bancorp

-0.33

Correlation Coefficient

Southern Michigan  Sturgis Bancorp

Very good diversification

The 3 months correlation between Southern and Sturgis is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Southern Michigan Bancorp and Sturgis Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturgis Bancorp 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 Sturgis Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturgis Bancorp has no effect on the direction of Southern Michigan i.e., Southern Michigan and Sturgis Bancorp go up and down completely randomly.

Pair Corralation between Southern Michigan and Sturgis Bancorp

If you would invest  1,719  in Southern Michigan Bancorp on October 5, 2024 and sell it today you would earn a total of  206.00  from holding Southern Michigan Bancorp or generate 11.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Southern Michigan Bancorp  vs.  Sturgis Bancorp

Southern Michigan Bancorp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Michigan Bancorp are ranked lower than 19 (%) 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.

Sturgis Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sturgis Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Sturgis Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Southern Michigan and Sturgis Bancorp

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

The idea behind Southern Michigan Bancorp and Sturgis 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.