Correlation Between WCF Bancorp and Southern Michigan

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

Diversification Opportunities for WCF Bancorp and Southern Michigan

0.1

Correlation Coefficient

WCF Bancorp  Southern Michigan

Average diversification

The 3 months correlation between WCF and Southern is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WCF 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 WCF 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 WCF 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 WCF Bancorp i.e., WCF Bancorp and Southern Michigan go up and down completely randomly.

Pair Corralation between WCF 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 Together
Strength	Insignificant
Accuracy	0.41%
Values	Daily Returns

WCF Bancorp  vs.  Southern Michigan Bancorp

WCF Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WCF Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, WCF Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 WCF Bancorp and Southern Michigan

The main advantage of trading using opposite WCF Bancorp and Southern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WCF 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 WCF 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.