Correlation Between Merchants Marine and Savi Financial

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

Diversification Opportunities for Merchants Marine and Savi Financial

-0.6

Correlation Coefficient

Merchants Marine  Savi Financial

Excellent diversification

The 3 months correlation between Merchants and Savi is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Savi Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savi Financial 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 Savi Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savi Financial has no effect on the direction of Merchants Marine i.e., Merchants Marine and Savi Financial go up and down completely randomly.

Pair Corralation between Merchants Marine and Savi Financial

Given the investment horizon of 90 days Merchants Marine Bancorp is expected to generate 7.29 times more return on investment than Savi Financial. However, Merchants Marine is 7.29 times more volatile than Savi Financial. It trades about 0.1 of its potential returns per unit of risk. Savi Financial is currently generating about 0.1 per unit of risk. If you would invest  4,294  in Merchants Marine Bancorp on October 11, 2024 and sell it today you would earn a total of  105.00  from holding Merchants Marine Bancorp or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Merchants Marine Bancorp  vs.  Savi Financial

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 current stock price disturbance, may contribute to short-term losses for the investors.

Savi Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Savi Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Savi Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merchants Marine and Savi Financial

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

The idea behind Merchants Marine Bancorp and Savi Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.