Correlation Between Merchants Bancorp and Medallion Bank

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

By analyzing existing cross correlation between Merchants Bancorp PR and Medallion Bank PR, you can compare the effects of market volatilities on Merchants Bancorp and Medallion Bank 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 Merchants Bancorp with a short position of Medallion Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Medallion Bank.

Diversification Opportunities for Merchants Bancorp and Medallion Bank

0.0

Correlation Coefficient

Merchants Bancorp  Medallion Bank

Pay attention - limited upside

The 3 months correlation between Merchants and Medallion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp PR and Medallion Bank PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Bank PR and Merchants Bancorp 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 Merchants Bancorp PR are associated (or correlated) with Medallion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Bank PR has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Medallion Bank go up and down completely randomly.

Pair Corralation between Merchants Bancorp and Medallion Bank

If you would invest  2,496  in Medallion Bank PR on December 24, 2024 and sell it today you would earn a total of  39.00  from holding Medallion Bank PR or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Merchants Bancorp PR  vs.  Medallion Bank PR

Merchants Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants Bancorp PR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Merchants Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Medallion Bank PR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Bank PR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Medallion Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merchants Bancorp and Medallion Bank

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

The idea behind Merchants Bancorp PR and Medallion Bank PR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.