Correlation Between Flywire Corp and Merrill Lynch

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

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

Diversification Opportunities for Flywire Corp and Merrill Lynch

-0.68

Correlation Coefficient

Flywire Corp  Merrill Lynch

Excellent diversification

The 3 months correlation between Flywire and Merrill is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Flywire Corp and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor and Flywire Corp 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 Flywire Corp are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of Flywire Corp i.e., Flywire Corp and Merrill Lynch go up and down completely randomly.

Pair Corralation between Flywire Corp and Merrill Lynch

Given the investment horizon of 90 days Flywire Corp is expected to generate 2.36 times less return on investment than Merrill Lynch. In addition to that, Flywire Corp is 2.74 times more volatile than Merrill Lynch Depositor. It trades about 0.01 of its total potential returns per unit of risk. Merrill Lynch Depositor is currently generating about 0.04 per unit of volatility. If you would invest  2,431  in Merrill Lynch Depositor on September 19, 2024 and sell it today you would earn a total of  199.00  from holding Merrill Lynch Depositor or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Flywire Corp  vs.  Merrill Lynch Depositor

Flywire Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flywire Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Flywire Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Flywire Corp and Merrill Lynch

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

The idea behind Flywire Corp and Merrill Lynch Depositor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.