Correlation Between Sturgis Bancorp and Southern Michigan

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

Diversification Opportunities for Sturgis Bancorp and Southern Michigan

-0.33

Correlation Coefficient

Sturgis Bancorp  Southern Michigan

Very good diversification

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

Pair Corralation between Sturgis Bancorp and Southern Michigan

If you would invest  1,543  in Southern Michigan Bancorp on October 5, 2024 and sell it today you would earn a total of  382.00  from holding Southern Michigan Bancorp or generate 24.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.41%
Values	Daily Returns

Sturgis Bancorp  vs.  Southern Michigan Bancorp

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.

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.

Pair Trading with Sturgis Bancorp and Southern Michigan

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

The idea behind Sturgis Bancorp and Southern Michigan 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.