Correlation Between Associated Banc and Merchants Bancorp

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

By analyzing existing cross correlation between Associated Banc Corp and Merchants Bancorp PR, you can compare the effects of market volatilities on Associated Banc and Merchants 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 Associated Banc with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Banc and Merchants Bancorp.

Diversification Opportunities for Associated Banc and Merchants Bancorp

-0.61

Correlation Coefficient

Associated Banc  Merchants Bancorp

Excellent diversification

The 3 months correlation between Associated and Merchants is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Associated Banc Corp and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Associated Banc 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 Associated Banc Corp are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Associated Banc i.e., Associated Banc and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Associated Banc and Merchants Bancorp

If you would invest  2,290  in Merchants Bancorp PR on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Merchants Bancorp PR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Associated Banc Corp  vs.  Merchants Bancorp PR

Associated Banc Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated Banc Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Associated Banc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Merchants Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Associated Banc and Merchants Bancorp

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

The idea behind Associated Banc Corp and Merchants Bancorp PR 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.