Correlation Between Lakeland Financial and MidWestOne Financial

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

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

Diversification Opportunities for Lakeland Financial and MidWestOne Financial

0.78

Correlation Coefficient

Lakeland Financial  MidWestOne Financial

Poor diversification

The 3 months correlation between Lakeland and MidWestOne is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Financial and MidWestOne Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidWestOne Financial and Lakeland Financial 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 Lakeland Financial are associated (or correlated) with MidWestOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidWestOne Financial has no effect on the direction of Lakeland Financial i.e., Lakeland Financial and MidWestOne Financial go up and down completely randomly.

Pair Corralation between Lakeland Financial and MidWestOne Financial

Given the investment horizon of 90 days Lakeland Financial is expected to generate 0.8 times more return on investment than MidWestOne Financial. However, Lakeland Financial is 1.25 times less risky than MidWestOne Financial. It trades about 0.0 of its potential returns per unit of risk. MidWestOne Financial Group is currently generating about -0.01 per unit of risk. If you would invest  6,162  in Lakeland Financial on February 28, 2024 and sell it today you would lose (59.00) from holding Lakeland Financial or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lakeland Financial  vs.  MidWestOne Financial Group

Lakeland Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakeland Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Lakeland Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

MidWestOne Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MidWestOne Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, MidWestOne Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lakeland Financial and MidWestOne Financial

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

The idea behind Lakeland Financial and MidWestOne Financial Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.