Correlation Between First Merchants and 020002AJ0

Can any of the company-specific risk be diversified away by investing in both First Merchants and 020002AJ0 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 020002AJ0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and ALL 69 15 MAY 38, you can compare the effects of market volatilities on First Merchants and 020002AJ0 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 020002AJ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 020002AJ0.

Diversification Opportunities for First Merchants and 020002AJ0

-0.56

Correlation Coefficient

First Merchants  020002AJ0

Excellent diversification

The 3 months correlation between First and 020002AJ0 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and ALL 69 15 MAY 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALL 69 15 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 020002AJ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALL 69 15 has no effect on the direction of First Merchants i.e., First Merchants and 020002AJ0 go up and down completely randomly.

Pair Corralation between First Merchants and 020002AJ0

Given the investment horizon of 90 days First Merchants is expected to under-perform the 020002AJ0. But the stock apears to be less risky and, when comparing its historical volatility, First Merchants is 2.89 times less risky than 020002AJ0. The stock trades about -0.17 of its potential returns per unit of risk. The ALL 69 15 MAY 38 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,351  in ALL 69 15 MAY 38 on September 23, 2024 and sell it today you would earn a total of  424.00  from holding ALL 69 15 MAY 38 or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

First Merchants  vs.  ALL 69 15 MAY 38

First Merchants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, First Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALL 69 15

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALL 69 15 MAY 38 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 020002AJ0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Merchants and 020002AJ0

The main advantage of trading using opposite First Merchants and 020002AJ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 020002AJ0 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 020002AJ0 will offset losses from the drop in 020002AJ0's long position.

The idea behind First Merchants and ALL 69 15 MAY 38 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.