Correlation Between Mercantile Bank and Macatawa Bank

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

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

Diversification Opportunities for Mercantile Bank and Macatawa Bank

0.0

Correlation Coefficient

Mercantile Bank  Macatawa Bank

Pay attention - limited upside

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

Pair Corralation between Mercantile Bank and Macatawa Bank

If you would invest  4,413  in Mercantile Bank on December 31, 2024 and sell it today you would lose (10.00) from holding Mercantile Bank or give up 0.23% of portfolio value over 90 days.

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

Mercantile Bank  vs.  Macatawa Bank

Mercantile Bank

Risk-Adjusted Performance

Very 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.

Macatawa Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macatawa Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Macatawa Bank is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mercantile Bank and Macatawa Bank

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

The idea behind Mercantile Bank and Macatawa Bank 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.