Correlation Between First Merchants and Blue Line
Can any of the company-specific risk be diversified away by investing in both First Merchants and Blue Line 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 First Merchants and Blue Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Blue Line Protection, you can compare the effects of market volatilities on First Merchants and Blue Line 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 First Merchants with a short position of Blue Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Blue Line.
Diversification Opportunities for First Merchants and Blue Line
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Blue is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Blue Line Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Line Protection and First Merchants 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 First Merchants are associated (or correlated) with Blue Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Line Protection has no effect on the direction of First Merchants i.e., First Merchants and Blue Line go up and down completely randomly.
Pair Corralation between First Merchants and Blue Line
Given the investment horizon of 90 days First Merchants is expected to generate 13.58 times less return on investment than Blue Line. But when comparing it to its historical volatility, First Merchants is 11.83 times less risky than Blue Line. It trades about 0.07 of its potential returns per unit of risk. Blue Line Protection is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Blue Line Protection on September 24, 2024 and sell it today you would earn a total of 1.51 from holding Blue Line Protection or generate 37.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Merchants vs. Blue Line Protection
Performance |
Timeline |
First Merchants |
Blue Line Protection |
First Merchants and Blue Line Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Merchants and Blue Line
The main advantage of trading using opposite First Merchants and Blue Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Blue Line 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 Blue Line will offset losses from the drop in Blue Line's long position.First Merchants vs. Home Federal Bancorp | First Merchants vs. First Northwest Bancorp | First Merchants vs. Community West Bancshares | First Merchants vs. HomeTrust Bancshares |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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