Correlation Between First Merchants and 655844CL0

Can any of the company-specific risk be diversified away by investing in both First Merchants and 655844CL0 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 655844CL0 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 29 25 AUG 51, you can compare the effects of market volatilities on First Merchants and 655844CL0 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 655844CL0. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and 655844CL0.

Diversification Opportunities for First Merchants and 655844CL0

-0.52

Correlation Coefficient

First Merchants  655844CL0

Excellent diversification

The 3 months correlation between First and 655844CL0 is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and NSC 29 25 AUG 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSC 29 25 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 655844CL0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSC 29 25 has no effect on the direction of First Merchants i.e., First Merchants and 655844CL0 go up and down completely randomly.

Pair Corralation between First Merchants and 655844CL0

Given the investment horizon of 90 days First Merchants is expected to under-perform the 655844CL0. But the stock apears to be less risky and, when comparing its historical volatility, First Merchants is 1.3 times less risky than 655844CL0. The stock trades about -0.37 of its potential returns per unit of risk. The NSC 29 25 AUG 51 is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  6,481  in NSC 29 25 AUG 51 on October 12, 2024 and sell it today you would lose (116.00) from holding NSC 29 25 AUG 51 or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

First Merchants  vs.  NSC 29 25 AUG 51

First Merchants

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, First Merchants is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NSC 29 25

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NSC 29 25 AUG 51 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 655844CL0 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Merchants and 655844CL0

The main advantage of trading using opposite First Merchants and 655844CL0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, 655844CL0 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 655844CL0 will offset losses from the drop in 655844CL0's long position.

The idea behind First Merchants and NSC 29 25 AUG 51 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.