Correlation Between Business First and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Business First 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 Business First and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Business First Bancshares and Merchants Bancorp, you can compare the effects of market volatilities on Business First 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 Business First with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Business First and Merchants Bancorp.
Diversification Opportunities for Business First and Merchants Bancorp
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Business and Merchants is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Business First Bancshares and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Business First 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 Business First Bancshares 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 Business First i.e., Business First and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Business First and Merchants Bancorp
Given the investment horizon of 90 days Business First Bancshares is expected to generate 0.78 times more return on investment than Merchants Bancorp. However, Business First Bancshares is 1.28 times less risky than Merchants Bancorp. It trades about 0.06 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.03 per unit of risk. If you would invest 2,142 in Business First Bancshares on September 4, 2024 and sell it today you would earn a total of 718.00 from holding Business First Bancshares or generate 33.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Business First Bancshares vs. Merchants Bancorp
Performance |
| Timeline |
| Business First Bancshares |
| Merchants Bancorp |
Business First and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Business First and Merchants Bancorp
The main advantage of trading using opposite Business First and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Business First 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.| Business First vs. International Bancshares | Business First vs. Finward Bancorp | Business First vs. Aquagold International | Business First vs. Thrivent High Yield |
| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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