Correlation Between Macatawa Bank and Banner

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

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

Diversification Opportunities for Macatawa Bank and Banner

-0.05

Correlation Coefficient

Macatawa Bank  Banner

Good diversification

The 3 months correlation between Macatawa and Banner is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Macatawa Bank and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and Macatawa Bank 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 Macatawa Bank are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Macatawa Bank i.e., Macatawa Bank and Banner go up and down completely randomly.

Pair Corralation between Macatawa Bank and Banner

Given the investment horizon of 90 days Macatawa Bank is expected to generate 4.79 times more return on investment than Banner. However, Macatawa Bank is 4.79 times more volatile than Banner. It trades about 0.26 of its potential returns per unit of risk. Banner is currently generating about -0.09 per unit of risk. If you would invest  964.00  in Macatawa Bank on January 29, 2024 and sell it today you would earn a total of  460.00  from holding Macatawa Bank or generate 47.72% return on investment over 90 days.

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

Macatawa Bank  vs.  Banner

Macatawa Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macatawa Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Macatawa Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Banner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banner has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Banner is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Macatawa Bank and Banner

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

The idea behind Macatawa Bank and Banner 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.