Correlation Between Associated Banc and First Merchants
Can any of the company-specific risk be diversified away by investing in both Associated Banc 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 Associated Banc and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated Banc Corp and First Merchants, you can compare the effects of market volatilities on Associated Banc 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 Associated Banc with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Banc and First Merchants.
Diversification Opportunities for Associated Banc and First Merchants
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Associated and First is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Associated Banc Corp and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Associated Banc 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 Associated Banc Corp 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 Associated Banc i.e., Associated Banc and First Merchants go up and down completely randomly.
Pair Corralation between Associated Banc and First Merchants
Assuming the 90 days trading horizon Associated Banc Corp is expected to under-perform the First Merchants. In addition to that, Associated Banc is 3.7 times more volatile than First Merchants. It trades about -0.11 of its total potential returns per unit of risk. First Merchants is currently generating about -0.01 per unit of volatility. If you would invest 2,518 in First Merchants on November 18, 2024 and sell it today you would lose (1.00) from holding First Merchants or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated Banc Corp vs. First Merchants
Performance |
| Timeline |
| Associated Banc Corp |
| First Merchants |
Associated Banc and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated Banc and First Merchants
The main advantage of trading using opposite Associated Banc and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Banc 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.| Associated Banc vs. Truist Financial | Associated Banc vs. Truist Financial | Associated Banc vs. US Bancorp | Associated Banc vs. MetLife Preferred Stock |
| First Merchants vs. Home Federal Bancorp | First Merchants vs. Lake Shore Bancorp | First Merchants vs. Old Point Financial | First Merchants vs. Parke 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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