Correlation Between First Merchants and WPLAU

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

By analyzing existing cross correlation between First Merchants and WPLAU 37 15 SEP 26, you can compare the effects of market volatilities on First Merchants and WPLAU 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 WPLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and WPLAU.

Diversification Opportunities for First Merchants and WPLAU

0.75

Correlation Coefficient

First Merchants  WPLAU

Poor diversification

The 3 months correlation between First and WPLAU is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and WPLAU 37 15 SEP 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPLAU 37 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 WPLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPLAU 37 15 has no effect on the direction of First Merchants i.e., First Merchants and WPLAU go up and down completely randomly.

Pair Corralation between First Merchants and WPLAU

Given the investment horizon of 90 days First Merchants is expected to under-perform the WPLAU. In addition to that, First Merchants is 2.0 times more volatile than WPLAU 37 15 SEP 26. It trades about -0.31 of its total potential returns per unit of risk. WPLAU 37 15 SEP 26 is currently generating about -0.38 per unit of volatility. If you would invest  9,853  in WPLAU 37 15 SEP 26 on October 11, 2024 and sell it today you would lose (316.00) from holding WPLAU 37 15 SEP 26 or give up 3.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.0%
Values	Daily Returns

First Merchants  vs.  WPLAU 37 15 SEP 26

First Merchants

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, First Merchants may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WPLAU 37 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPLAU 37 15 SEP 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WPLAU 37 15 SEP 26 investors.

Pair Trading with First Merchants and WPLAU

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

The idea behind First Merchants and WPLAU 37 15 SEP 26 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.