Correlation Between First Merchants and 62886HAP6

Can any of the company-specific risk be diversified away by investing in both First Merchants and 62886HAP6 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 62886HAP6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and NCL 3625, you can compare the effects of market volatilities on First Merchants and 62886HAP6 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 62886HAP6. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 62886HAP6.

Diversification Opportunities for First Merchants and 62886HAP6

0.56

Correlation Coefficient

First Merchants  62886HAP6

Very weak diversification

The 3 months correlation between First and 62886HAP6 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and NCL 3625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 62886HAP6 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 62886HAP6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 62886HAP6 has no effect on the direction of First Merchants i.e., First Merchants and 62886HAP6 go up and down completely randomly.

Pair Corralation between First Merchants and 62886HAP6

Given the investment horizon of 90 days First Merchants is expected to under-perform the 62886HAP6. In addition to that, First Merchants is 3.58 times more volatile than NCL 3625. It trades about -0.25 of its total potential returns per unit of risk. NCL 3625 is currently generating about -0.26 per unit of volatility. If you would invest  9,989  in NCL 3625 on September 25, 2024 and sell it today you would lose (138.00) from holding NCL 3625 or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	55.0%
Values	Daily Returns

First Merchants  vs.  NCL 3625

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 exhibited solid returns over the last few months and may actually be approaching a breakup point.

62886HAP6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCL 3625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 62886HAP6 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 62886HAP6

The main advantage of trading using opposite First Merchants and 62886HAP6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 62886HAP6 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 62886HAP6 will offset losses from the drop in 62886HAP6's long position.

The idea behind First Merchants and NCL 3625 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.