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 47 15 JAN 53, 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

-0.7

Correlation Coefficient

First Merchants  NESNVX

Excellent diversification

The 3 months correlation between First and NESNVX is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and NESNVX 47 15 JAN 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESNVX 47 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 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 47 15 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 generate 1.21 times more return on investment than NESNVX. However, First Merchants is 1.21 times more volatile than NESNVX 47 15 JAN 53. It trades about 0.09 of its potential returns per unit of risk. NESNVX 47 15 JAN 53 is currently generating about 0.08 per unit of risk. If you would invest  3,177  in First Merchants on September 25, 2024 and sell it today you would earn a total of  910.00  from holding First Merchants or generate 28.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	61.11%
Values	Daily Returns

First Merchants  vs.  NESNVX 47 15 JAN 53

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.

NESNVX 47 15

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NESNVX 47 15 JAN 53 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NESNVX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 47 15 JAN 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.