Correlation Between Absa Group and First Merchants
Can any of the company-specific risk be diversified away by investing in both Absa Group and First Merchants 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 Absa Group and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absa Group Limited and First Merchants, you can compare the effects of market volatilities on Absa Group and First Merchants 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 Absa Group with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and First Merchants.
Diversification Opportunities for Absa Group and First Merchants
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Absa and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Limited and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Absa Group 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 Absa Group Limited are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Absa Group i.e., Absa Group and First Merchants go up and down completely randomly.
Pair Corralation between Absa Group and First Merchants
If you would invest 2,493 in First Merchants on November 9, 2024 and sell it today you would earn a total of 45.00 from holding First Merchants or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absa Group Limited vs. First Merchants
Performance |
| Timeline |
| Absa Group Limited |
| First Merchants |
Absa Group and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absa Group and First Merchants
The main advantage of trading using opposite Absa Group and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa Group position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.The idea behind Absa Group Limited and First Merchants 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.| First Merchants vs. Heartland Financial USA | First Merchants vs. OceanFirst Financial Corp | First Merchants vs. Old National Bancorp | First Merchants vs. Old National Bancorp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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