Correlation Between BankFirst Capital and Merchants Marine

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

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

Diversification Opportunities for BankFirst Capital and Merchants Marine

-0.2

Correlation Coefficient

BankFirst Capital  Merchants Marine

Good diversification

The 3 months correlation between BankFirst and Merchants is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding BankFirst Capital and Merchants Marine Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Marine Bancorp and BankFirst Capital 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 BankFirst Capital are associated (or correlated) with Merchants Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Marine Bancorp has no effect on the direction of BankFirst Capital i.e., BankFirst Capital and Merchants Marine go up and down completely randomly.

Pair Corralation between BankFirst Capital and Merchants Marine

Given the investment horizon of 90 days BankFirst Capital is expected to generate 0.64 times more return on investment than Merchants Marine. However, BankFirst Capital is 1.56 times less risky than Merchants Marine. It trades about 0.03 of its potential returns per unit of risk. Merchants Marine Bancorp is currently generating about -0.05 per unit of risk. If you would invest  4,085  in BankFirst Capital on December 23, 2024 and sell it today you would earn a total of  35.00  from holding BankFirst Capital or generate 0.86% return on investment over 90 days.

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

BankFirst Capital  vs.  Merchants Marine Bancorp

BankFirst Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankFirst Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Merchants Marine Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants Marine Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Merchants Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BankFirst Capital and Merchants Marine

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

The idea behind BankFirst Capital and Merchants Marine 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.