Correlation Between First Merchants and 21036PBL1

Can any of the company-specific risk be diversified away by investing in both First Merchants and 21036PBL1 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 21036PBL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and STZ 475 09 MAY 32, you can compare the effects of market volatilities on First Merchants and 21036PBL1 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 21036PBL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 21036PBL1.

Diversification Opportunities for First Merchants and 21036PBL1

-0.54

Correlation Coefficient

First Merchants  21036PBL1

Excellent diversification

The 3 months correlation between First and 21036PBL1 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and STZ 475 09 MAY 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STZ 475 09 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 21036PBL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STZ 475 09 has no effect on the direction of First Merchants i.e., First Merchants and 21036PBL1 go up and down completely randomly.

Pair Corralation between First Merchants and 21036PBL1

Given the investment horizon of 90 days First Merchants is expected to generate 2.91 times more return on investment than 21036PBL1. However, First Merchants is 2.91 times more volatile than STZ 475 09 MAY 32. It trades about 0.01 of its potential returns per unit of risk. STZ 475 09 MAY 32 is currently generating about 0.0 per unit of risk. If you would invest  3,916  in First Merchants on October 3, 2024 and sell it today you would earn a total of  73.00  from holding First Merchants or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.76%
Values	Daily Returns

First Merchants  vs.  STZ 475 09 MAY 32

First Merchants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, First Merchants exhibited solid returns over the last few months and may actually be approaching a breakup point.

STZ 475 09

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STZ 475 09 MAY 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 21036PBL1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Merchants and 21036PBL1

The main advantage of trading using opposite First Merchants and 21036PBL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 21036PBL1 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 21036PBL1 will offset losses from the drop in 21036PBL1's long position.

The idea behind First Merchants and STZ 475 09 MAY 32 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.