Correlation Between Merchants Marine and Southern BancShares

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

Diversification Opportunities for Merchants Marine and Southern BancShares

-0.14

Correlation Coefficient

Merchants Marine  Southern BancShares

Good diversification

The 3 months correlation between Merchants and Southern is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Southern BancShares NC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares 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 Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares has no effect on the direction of Merchants Marine i.e., Merchants Marine and Southern BancShares go up and down completely randomly.

Pair Corralation between Merchants Marine and Southern BancShares

Given the investment horizon of 90 days Merchants Marine Bancorp is expected to under-perform the Southern BancShares. But the otc stock apears to be less risky and, when comparing its historical volatility, Merchants Marine Bancorp is 1.02 times less risky than Southern BancShares. The otc stock trades about -0.02 of its potential returns per unit of risk. The Southern BancShares NC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  578,918  in Southern BancShares NC on September 22, 2024 and sell it today you would earn a total of  236,082  from holding Southern BancShares NC or generate 40.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.85%
Values	Daily Returns

Merchants Marine Bancorp  vs.  Southern BancShares NC

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 somewhat strong primary indicators, Merchants Marine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merchants Marine and Southern BancShares

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

The idea behind Merchants Marine Bancorp and Southern BancShares NC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.