Correlation Between First Merchants and 532457CG1

Can any of the company-specific risk be diversified away by investing in both First Merchants and 532457CG1 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 532457CG1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and LLY 4875 27 FEB 53, you can compare the effects of market volatilities on First Merchants and 532457CG1 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 532457CG1. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 532457CG1.

Diversification Opportunities for First Merchants and 532457CG1

0.22

Correlation Coefficient

First Merchants  532457CG1

Modest diversification

The 3 months correlation between First and 532457CG1 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and LLY 4875 27 FEB 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLY 4875 27 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 532457CG1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLY 4875 27 has no effect on the direction of First Merchants i.e., First Merchants and 532457CG1 go up and down completely randomly.

Pair Corralation between First Merchants and 532457CG1

Given the investment horizon of 90 days First Merchants is expected to generate 5.37 times less return on investment than 532457CG1. But when comparing it to its historical volatility, First Merchants is 1.15 times less risky than 532457CG1. It trades about 0.03 of its potential returns per unit of risk. LLY 4875 27 FEB 53 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,076  in LLY 4875 27 FEB 53 on December 29, 2024 and sell it today you would earn a total of  1,245  from holding LLY 4875 27 FEB 53 or generate 13.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

First Merchants  vs.  LLY 4875 27 FEB 53

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.

LLY 4875 27

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LLY 4875 27 FEB 53 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, 532457CG1 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Merchants and 532457CG1

The main advantage of trading using opposite First Merchants and 532457CG1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 532457CG1 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 532457CG1 will offset losses from the drop in 532457CG1's long position.

The idea behind First Merchants and LLY 4875 27 FEB 53 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.