Correlation Between Mercantile Bank and HTBI Old

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

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

Diversification Opportunities for Mercantile Bank and HTBI Old

-0.79

Correlation Coefficient

Mercantile Bank  HTBI Old

Pay attention - limited upside

The 3 months correlation between Mercantile and HTBI is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and HTBI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HTBI Old and Mercantile Bank 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 Mercantile Bank are associated (or correlated) with HTBI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HTBI Old has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and HTBI Old go up and down completely randomly.

Pair Corralation between Mercantile Bank and HTBI Old

Given the investment horizon of 90 days Mercantile Bank is expected to generate 30.88 times less return on investment than HTBI Old. In addition to that, Mercantile Bank is 1.16 times more volatile than HTBI Old. It trades about 0.0 of its total potential returns per unit of risk. HTBI Old is currently generating about 0.14 per unit of volatility. If you would invest  3,372  in HTBI Old on December 28, 2024 and sell it today you would earn a total of  283.00  from holding HTBI Old or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	60.66%
Values	Daily Returns

Mercantile Bank  vs.  HTBI Old

Mercantile Bank

Risk-Adjusted Performance

Weak

Over the last 90 days Mercantile Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mercantile Bank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

HTBI Old

Risk-Adjusted Performance

OK

Over the last 90 days HTBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile fundamental drivers, HTBI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercantile Bank and HTBI Old

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

The idea behind Mercantile Bank and HTBI Old 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.