Correlation Between SCOR PK and Merchants Bancorp

Can any of the company-specific risk be diversified away by investing in both SCOR PK and Merchants Bancorp 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 SCOR PK and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SCOR PK and Merchants Bancorp, you can compare the effects of market volatilities on SCOR PK and Merchants Bancorp 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 SCOR PK with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOR PK and Merchants Bancorp.

Diversification Opportunities for SCOR PK and Merchants Bancorp

0.76

Correlation Coefficient

SCOR PK  Merchants Bancorp

Poor diversification

The 3 months correlation between SCOR and Merchants is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and SCOR PK 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 SCOR PK are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of SCOR PK i.e., SCOR PK and Merchants Bancorp go up and down completely randomly.

Pair Corralation between SCOR PK and Merchants Bancorp

Assuming the 90 days horizon SCOR PK is expected to generate 14.02 times less return on investment than Merchants Bancorp. In addition to that, SCOR PK is 6.87 times more volatile than Merchants Bancorp. It trades about 0.0 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about 0.15 per unit of volatility. If you would invest  2,110  in Merchants Bancorp on October 5, 2024 and sell it today you would earn a total of  390.00  from holding Merchants Bancorp or generate 18.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.88%
Values	Daily Returns

SCOR PK  vs.  Merchants Bancorp

SCOR PK

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

Merchants Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Merchants Bancorp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SCOR PK and Merchants Bancorp

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

The idea behind SCOR PK and Merchants Bancorp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.