Correlation Between Merchants Marine and United Bancorporation

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

Diversification Opportunities for Merchants Marine and United Bancorporation

-0.38

Correlation Coefficient

Merchants Marine  United Bancorporation

Very good diversification

The 3 months correlation between Merchants and United is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and United Bancorp. of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bancorporation 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 United Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bancorporation has no effect on the direction of Merchants Marine i.e., Merchants Marine and United Bancorporation go up and down completely randomly.

Pair Corralation between Merchants Marine and United Bancorporation

Given the investment horizon of 90 days Merchants Marine Bancorp is expected to generate 0.55 times more return on investment than United Bancorporation. However, Merchants Marine Bancorp is 1.82 times less risky than United Bancorporation. It trades about -0.03 of its potential returns per unit of risk. United Bancorporation of is currently generating about -0.03 per unit of risk. If you would invest  4,265  in Merchants Marine Bancorp on December 2, 2024 and sell it today you would lose (55.00) from holding Merchants Marine Bancorp or give up 1.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.55%
Values	Daily Returns

Merchants Marine Bancorp  vs.  United Bancorp. of

Merchants Marine Bancorp

Risk-Adjusted Performance

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.

United Bancorporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Bancorporation of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United Bancorporation is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merchants Marine and United Bancorporation

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

The idea behind Merchants Marine Bancorp and United Bancorporation of 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.