Correlation Between Eastern Michigan and Sturgis Bancorp

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

Diversification Opportunities for Eastern Michigan and Sturgis Bancorp

-0.38

Correlation Coefficient

Eastern Michigan  Sturgis Bancorp

Very good diversification

The 3 months correlation between Eastern and Sturgis is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Michigan Financial and Sturgis Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturgis Bancorp 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 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 Eastern Michigan i.e., Eastern Michigan and Sturgis Bancorp go up and down completely randomly.

Pair Corralation between Eastern Michigan and Sturgis Bancorp

If you would invest  3,160  in Eastern Michigan Financial on September 10, 2024 and sell it today you would earn a total of  377.00  from holding Eastern Michigan Financial or generate 11.93% return on investment over 90 days.

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

Eastern Michigan Financial  vs.  Sturgis Bancorp

Eastern Michigan Fin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Eastern Michigan may actually be approaching a critical reversion point that can send shares even higher in January 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 Eastern Michigan and Sturgis Bancorp

The main advantage of trading using opposite Eastern Michigan and Sturgis Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Michigan Financial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.