Correlation Between Merchants Marine and Liberty Northwest
Can any of the company-specific risk be diversified away by investing in both Merchants Marine and Liberty Northwest 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 Liberty Northwest 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 Liberty Northwest Bancorp, you can compare the effects of market volatilities on Merchants Marine and Liberty Northwest 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 Liberty Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Marine and Liberty Northwest.
Diversification Opportunities for Merchants Marine and Liberty Northwest
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merchants and Liberty is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Merchants Marine i.e., Merchants Marine and Liberty Northwest go up and down completely randomly.
Pair Corralation between Merchants Marine and Liberty Northwest
Given the investment horizon of 90 days Merchants Marine Bancorp is expected to under-perform the Liberty Northwest. But the otc stock apears to be less risky and, when comparing its historical volatility, Merchants Marine Bancorp is 3.15 times less risky than Liberty Northwest. The otc stock trades about -0.36 of its potential returns per unit of risk. The Liberty Northwest Bancorp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 516.00 in Liberty Northwest Bancorp on October 15, 2024 and sell it today you would earn a total of 33.00 from holding Liberty Northwest Bancorp or generate 6.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 90.0% |
Values | Daily Returns |
Merchants Marine Bancorp vs. Liberty Northwest Bancorp
Performance |
Timeline |
Merchants Marine Bancorp |
Liberty Northwest Bancorp |
Merchants Marine and Liberty Northwest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merchants Marine and Liberty Northwest
The main advantage of trading using opposite Merchants Marine and Liberty Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Marine position performs unexpectedly, Liberty Northwest 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 Liberty Northwest will offset losses from the drop in Liberty Northwest's long position.Merchants Marine vs. Mission Valley Bancorp | Merchants Marine vs. Harbor Bankshares | Merchants Marine vs. Oconee Financial | Merchants Marine vs. MF Bancorp |
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Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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