Correlation Between F M and University Bancorp

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

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

Diversification Opportunities for F M and University Bancorp

0.64

Correlation Coefficient

F M  University Bancorp

Poor diversification

The 3 months correlation between FMBM and University is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding F M Bank and University Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on University Bancorp and F M 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 F M Bank are associated (or correlated) with University Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of University Bancorp has no effect on the direction of F M i.e., F M and University Bancorp go up and down completely randomly.

Pair Corralation between F M and University Bancorp

Given the investment horizon of 90 days F M Bank is expected to generate 1.86 times more return on investment than University Bancorp. However, F M is 1.86 times more volatile than University Bancorp. It trades about 0.2 of its potential returns per unit of risk. University Bancorp is currently generating about 0.04 per unit of risk. If you would invest  2,312  in F M Bank on August 18, 2025 and sell it today you would earn a total of  383.00  from holding F M Bank or generate 16.57% return on investment over 90 days.

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

F M Bank  vs.  University Bancorp

F M Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in F M Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, F M displayed solid returns over the last few months and may actually be approaching a breakup point.

University Bancorp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in University Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, University Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with F M and University Bancorp

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

The idea behind F M Bank and University 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.