Correlation Between Cullman Bancorp and First Mid

Can any of the company-specific risk be diversified away by investing in both Cullman Bancorp and First Mid 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 Cullman Bancorp and First Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cullman Bancorp and First Mid Illinois, you can compare the effects of market volatilities on Cullman Bancorp and First Mid 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 Cullman Bancorp with a short position of First Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullman Bancorp and First Mid.

Diversification Opportunities for Cullman Bancorp and First Mid

-0.27

Correlation Coefficient

Cullman Bancorp  First Mid

Very good diversification

The 3 months correlation between Cullman and First is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cullman Bancorp and First Mid Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mid Illinois and Cullman 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 Cullman Bancorp are associated (or correlated) with First Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mid Illinois has no effect on the direction of Cullman Bancorp i.e., Cullman Bancorp and First Mid go up and down completely randomly.

Pair Corralation between Cullman Bancorp and First Mid

Given the investment horizon of 90 days Cullman Bancorp is expected to under-perform the First Mid. But the stock apears to be less risky and, when comparing its historical volatility, Cullman Bancorp is 1.3 times less risky than First Mid. The stock trades about -0.03 of its potential returns per unit of risk. The First Mid Illinois is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,050  in First Mid Illinois on March 7, 2024 and sell it today you would earn a total of  86.00  from holding First Mid Illinois or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Cullman Bancorp  vs.  First Mid Illinois

Cullman Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cullman Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Cullman Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Mid Illinois

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Mid Illinois are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, First Mid is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cullman Bancorp and First Mid

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

The idea behind Cullman Bancorp and First Mid Illinois 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.