Correlation Between Eastern Michigan and Pinnacle Bancshares

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

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

Diversification Opportunities for Eastern Michigan and Pinnacle Bancshares

0.18

Correlation Coefficient

Eastern Michigan  Pinnacle Bancshares

Average diversification

The 3 months correlation between Eastern and Pinnacle is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Michigan Financial and Pinnacle Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bancshares and Eastern 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 Eastern Michigan Financial are associated (or correlated) with Pinnacle Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bancshares has no effect on the direction of Eastern Michigan i.e., Eastern Michigan and Pinnacle Bancshares go up and down completely randomly.

Pair Corralation between Eastern Michigan and Pinnacle Bancshares

If you would invest  3,050  in Eastern Michigan Financial on September 2, 2024 and sell it today you would earn a total of  491.00  from holding Eastern Michigan Financial or generate 16.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Eastern Michigan Financial  vs.  Pinnacle Bancshares

Eastern Michigan Fin

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Eastern Michigan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pinnacle Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eastern Michigan and Pinnacle Bancshares

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

The idea behind Eastern Michigan Financial and Pinnacle Bancshares 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.