Correlation Between First Merchants and 571903BH5

Can any of the company-specific risk be diversified away by investing in both First Merchants and 571903BH5 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 571903BH5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and MAR 275 15 OCT 33, you can compare the effects of market volatilities on First Merchants and 571903BH5 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 571903BH5. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 571903BH5.

Diversification Opportunities for First Merchants and 571903BH5

-0.33

Correlation Coefficient

First Merchants  571903BH5

Very good diversification

The 3 months correlation between First and 571903BH5 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and MAR 275 15 OCT 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAR 275 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 571903BH5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAR 275 15 has no effect on the direction of First Merchants i.e., First Merchants and 571903BH5 go up and down completely randomly.

Pair Corralation between First Merchants and 571903BH5

Given the investment horizon of 90 days First Merchants is expected to generate 0.4 times more return on investment than 571903BH5. However, First Merchants is 2.48 times less risky than 571903BH5. It trades about -0.24 of its potential returns per unit of risk. MAR 275 15 OCT 33 is currently generating about -0.16 per unit of risk. If you would invest  4,461  in First Merchants on September 24, 2024 and sell it today you would lose (372.00) from holding First Merchants or give up 8.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Merchants  vs.  MAR 275 15 OCT 33

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 weak primary indicators, First Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MAR 275 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAR 275 15 OCT 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 MAR 275 15 OCT 33 investors.

Pair Trading with First Merchants and 571903BH5

The main advantage of trading using opposite First Merchants and 571903BH5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 571903BH5 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 571903BH5 will offset losses from the drop in 571903BH5's long position.

The idea behind First Merchants and MAR 275 15 OCT 33 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.