Correlation Between Southern Michigan and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Southern Michigan and Citizens Financial 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 Southern Michigan and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Michigan Bancorp and Citizens Financial Corp, you can compare the effects of market volatilities on Southern Michigan and Citizens Financial 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 Southern Michigan with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Michigan and Citizens Financial.
Diversification Opportunities for Southern Michigan and Citizens Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Citizens is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southern Michigan Bancorp and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp and Southern 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 Southern Michigan Bancorp are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Southern Michigan i.e., Southern Michigan and Citizens Financial go up and down completely randomly.
Pair Corralation between Southern Michigan and Citizens Financial
Given the investment horizon of 90 days Southern Michigan Bancorp is expected to generate 0.54 times more return on investment than Citizens Financial. However, Southern Michigan Bancorp is 1.86 times less risky than Citizens Financial. It trades about 0.23 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about -0.27 per unit of risk. If you would invest 1,865 in Southern Michigan Bancorp on September 25, 2024 and sell it today you would earn a total of 60.00 from holding Southern Michigan Bancorp or generate 3.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.24% |
Values | Daily Returns |
Southern Michigan Bancorp vs. Citizens Financial Corp
Performance |
Timeline |
Southern Michigan Bancorp |
Citizens Financial Corp |
Southern Michigan and Citizens Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southern Michigan and Citizens Financial
The main advantage of trading using opposite Southern Michigan and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Michigan position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.Southern Michigan vs. Citizens Financial Corp | Southern Michigan vs. Farmers Bancorp | Southern Michigan vs. Alpine Banks of | Southern Michigan vs. Taylor Calvin B |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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