Correlation Between First Merchants and BankUnited

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

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

Diversification Opportunities for First Merchants and BankUnited

0.03

Correlation Coefficient

First Merchants  BankUnited

Significant diversification

The 3 months correlation between First and BankUnited is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited 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 BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of First Merchants i.e., First Merchants and BankUnited go up and down completely randomly.

Pair Corralation between First Merchants and BankUnited

Assuming the 90 days horizon First Merchants is expected to generate 0.45 times more return on investment than BankUnited. However, First Merchants is 2.21 times less risky than BankUnited. It trades about 0.02 of its potential returns per unit of risk. BankUnited is currently generating about -0.07 per unit of risk. If you would invest  2,514  in First Merchants on December 22, 2024 and sell it today you would earn a total of  23.00  from holding First Merchants or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Merchants  vs.  BankUnited

First Merchants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, First Merchants is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BankUnited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankUnited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with First Merchants and BankUnited

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

The idea behind First Merchants and BankUnited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.