Correlation Between First Merchants and Luther Burbank

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

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

Diversification Opportunities for First Merchants and Luther Burbank

0.0

Correlation Coefficient

First Merchants  Luther Burbank

Pay attention - limited upside

The 3 months correlation between First and Luther is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Luther Burbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luther Burbank 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 Luther Burbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luther Burbank has no effect on the direction of First Merchants i.e., First Merchants and Luther Burbank go up and down completely randomly.

Pair Corralation between First Merchants and Luther Burbank

If you would invest  3,991  in First Merchants on December 27, 2024 and sell it today you would earn a total of  113.00  from holding First Merchants or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Merchants  vs.  Luther Burbank

First Merchants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 2 (%) 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.

Luther Burbank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luther Burbank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Luther Burbank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Merchants and Luther Burbank

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

The idea behind First Merchants and Luther Burbank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.