Correlation Between First Merchants and BHCCN

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

By analyzing existing cross correlation between First Merchants and BHCCN 14 15 OCT 30, you can compare the effects of market volatilities on First Merchants and BHCCN 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 BHCCN. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and BHCCN.

Diversification Opportunities for First Merchants and BHCCN

0.74

Correlation Coefficient

First Merchants  BHCCN

Poor diversification

The 3 months correlation between First and BHCCN is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and BHCCN 14 15 OCT 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHCCN 14 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 BHCCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHCCN 14 15 has no effect on the direction of First Merchants i.e., First Merchants and BHCCN go up and down completely randomly.

Pair Corralation between First Merchants and BHCCN

Given the investment horizon of 90 days First Merchants is expected to generate 3.49 times less return on investment than BHCCN. But when comparing it to its historical volatility, First Merchants is 1.09 times less risky than BHCCN. It trades about 0.02 of its potential returns per unit of risk. BHCCN 14 15 OCT 30 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,944  in BHCCN 14 15 OCT 30 on September 23, 2024 and sell it today you would earn a total of  1,924  from holding BHCCN 14 15 OCT 30 or generate 32.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	52.11%
Values	Daily Returns

First Merchants  vs.  BHCCN 14 15 OCT 30

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.

BHCCN 14 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHCCN 14 15 OCT 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for BHCCN 14 15 OCT 30 investors.

Pair Trading with First Merchants and BHCCN

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

The idea behind First Merchants and BHCCN 14 15 OCT 30 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.