Correlation Between Merchants Marine and Bank of Idaho Holding

Can any of the company-specific risk be diversified away by investing in both Merchants Marine and Bank of Idaho Holding 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 Idaho Holding 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 Idaho, you can compare the effects of market volatilities on Merchants Marine and Bank of Idaho Holding 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 Idaho Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Marine and Bank of Idaho Holding.

Diversification Opportunities for Merchants Marine and Bank of Idaho Holding

-0.33

Correlation Coefficient

Merchants Marine  Bank of Idaho Holding

Very good diversification

The 3 months correlation between Merchants and Bank is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Bank of Idaho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Idaho Holding 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 Idaho Holding. 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 Idaho Holding has no effect on the direction of Merchants Marine i.e., Merchants Marine and Bank of Idaho Holding go up and down completely randomly.

Pair Corralation between Merchants Marine and Bank of Idaho Holding

Given the investment horizon of 90 days Merchants Marine Bancorp is expected to under-perform the Bank of Idaho Holding. But the otc stock apears to be less risky and, when comparing its historical volatility, Merchants Marine Bancorp is 3.58 times less risky than Bank of Idaho Holding. The otc stock trades about -0.09 of its potential returns per unit of risk. The Bank of Idaho is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,300  in Bank of Idaho on October 26, 2024 and sell it today you would earn a total of  2,000  from holding Bank of Idaho or generate 60.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Merchants Marine Bancorp  vs.  Bank of Idaho

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 Idaho Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bank of Idaho Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merchants Marine and Bank of Idaho Holding

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

The idea behind Merchants Marine Bancorp and Bank of Idaho 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.