Correlation Between Merchants Marine and Bank of South

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

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

Diversification Opportunities for Merchants Marine and Bank of South

0.32

Correlation Coefficient

Merchants Marine  Bank of South

Weak diversification

The 3 months correlation between Merchants and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Bank of South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of South and Merchants Marine 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 Marine Bancorp are associated (or correlated) with Bank of South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of South has no effect on the direction of Merchants Marine i.e., Merchants Marine and Bank of South go up and down completely randomly.

Pair Corralation between Merchants Marine and Bank of South

If you would invest  4,245  in Merchants Marine Bancorp on October 26, 2024 and sell it today you would earn a total of  105.00  from holding Merchants Marine Bancorp or generate 2.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.56%
Values	Daily Returns

Merchants Marine Bancorp  vs.  Bank of South

Merchants Marine Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Marine Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bank of South

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Merchants Marine and Bank of South

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

The idea behind Merchants Marine Bancorp and Bank of South 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.