Correlation Between Equity Bancshares, and First Merchants

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

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

Diversification Opportunities for Equity Bancshares, and First Merchants

0.59

Correlation Coefficient

Equity Bancshares,  First Merchants

Very weak diversification

The 3 months correlation between Equity and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Equity Bancshares, and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Equity Bancshares, 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 Equity Bancshares, are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Equity Bancshares, i.e., Equity Bancshares, and First Merchants go up and down completely randomly.

Pair Corralation between Equity Bancshares, and First Merchants

Given the investment horizon of 90 days Equity Bancshares, is expected to under-perform the First Merchants. In addition to that, Equity Bancshares, is 1.02 times more volatile than First Merchants. It trades about -0.04 of its total potential returns per unit of risk. First Merchants is currently generating about 0.04 per unit of volatility. If you would invest  3,968  in First Merchants on December 28, 2024 and sell it today you would earn a total of  136.00  from holding First Merchants or generate 3.43% return on investment over 90 days.

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

Equity Bancshares,  vs.  First Merchants

Equity Bancshares,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Bancshares, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Equity Bancshares, is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Merchants

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, First Merchants is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Equity Bancshares, and First Merchants

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

The idea behind Equity Bancshares, and First Merchants 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.