Correlation Between First Merchants and 655844CJ5

Can any of the company-specific risk be diversified away by investing in both First Merchants and 655844CJ5 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 655844CJ5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and NSC 41 15 MAY 21, you can compare the effects of market volatilities on First Merchants and 655844CJ5 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 655844CJ5. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 655844CJ5.

Diversification Opportunities for First Merchants and 655844CJ5

-0.71

Correlation Coefficient

First Merchants  655844CJ5

Pay attention - limited upside

The 3 months correlation between First and 655844CJ5 is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and NSC 41 15 MAY 21 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSC 41 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 655844CJ5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSC 41 15 has no effect on the direction of First Merchants i.e., First Merchants and 655844CJ5 go up and down completely randomly.

Pair Corralation between First Merchants and 655844CJ5

Given the investment horizon of 90 days First Merchants is expected to under-perform the 655844CJ5. But the stock apears to be less risky and, when comparing its historical volatility, First Merchants is 1.17 times less risky than 655844CJ5. The stock trades about -0.25 of its potential returns per unit of risk. The NSC 41 15 MAY 21 is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  7,300  in NSC 41 15 MAY 21 on September 24, 2024 and sell it today you would lose (420.00) from holding NSC 41 15 MAY 21 or give up 5.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

First Merchants  vs.  NSC 41 15 MAY 21

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

NSC 41 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NSC 41 15 MAY 21 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 NSC 41 15 MAY 21 investors.

Pair Trading with First Merchants and 655844CJ5

The main advantage of trading using opposite First Merchants and 655844CJ5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 655844CJ5 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 655844CJ5 will offset losses from the drop in 655844CJ5's long position.

The idea behind First Merchants and NSC 41 15 MAY 21 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.