Correlation Between Sturgis Bancorp and Eastern Michigan

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

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

Diversification Opportunities for Sturgis Bancorp and Eastern Michigan

-0.43

Correlation Coefficient

Sturgis Bancorp  Eastern Michigan

Very good diversification

The 3 months correlation between Sturgis and Eastern is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sturgis Bancorp and Eastern Michigan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Michigan Fin and Sturgis Bancorp 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 Sturgis Bancorp are associated (or correlated) with Eastern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Michigan Fin has no effect on the direction of Sturgis Bancorp i.e., Sturgis Bancorp and Eastern Michigan go up and down completely randomly.

Pair Corralation between Sturgis Bancorp and Eastern Michigan

If you would invest  3,200  in Eastern Michigan Financial on September 13, 2024 and sell it today you would earn a total of  350.00  from holding Eastern Michigan Financial or generate 10.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Sturgis Bancorp  vs.  Eastern Michigan Financial

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.

Eastern Michigan Fin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Eastern Michigan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sturgis Bancorp and Eastern Michigan

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

The idea behind Sturgis Bancorp and Eastern Michigan 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.

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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.