Correlation Between First Merchants and NESNVX

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

By analyzing existing cross correlation between First Merchants and NESNVX 425 01 OCT 29, you can compare the effects of market volatilities on First Merchants and NESNVX 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 NESNVX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and NESNVX.

Diversification Opportunities for First Merchants and NESNVX

0.71

Correlation Coefficient

First Merchants  NESNVX

Poor diversification

The 3 months correlation between First and NESNVX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and NESNVX 425 01 OCT 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESNVX 425 01 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 NESNVX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NESNVX 425 01 has no effect on the direction of First Merchants i.e., First Merchants and NESNVX go up and down completely randomly.

Pair Corralation between First Merchants and NESNVX

Given the investment horizon of 90 days First Merchants is expected to under-perform the NESNVX. In addition to that, First Merchants is 2.42 times more volatile than NESNVX 425 01 OCT 29. It trades about -0.24 of its total potential returns per unit of risk. NESNVX 425 01 OCT 29 is currently generating about 0.12 per unit of volatility. If you would invest  9,888  in NESNVX 425 01 OCT 29 on September 26, 2024 and sell it today you would earn a total of  72.00  from holding NESNVX 425 01 OCT 29 or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	42.86%
Values	Daily Returns

First Merchants  vs.  NESNVX 425 01 OCT 29

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 inconsistent primary indicators, First Merchants exhibited solid returns over the last few months and may actually be approaching a breakup point.

NESNVX 425 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESNVX 425 01 OCT 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NESNVX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Merchants and NESNVX

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

The idea behind First Merchants and NESNVX 425 01 OCT 29 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.