Correlation Between Customers Bancorp and First Merchants
Can any of the company-specific risk be diversified away by investing in both Customers Bancorp 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 Customers Bancorp and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Customers Bancorp and First Merchants, you can compare the effects of market volatilities on Customers Bancorp 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 Customers Bancorp with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Customers Bancorp and First Merchants.
Diversification Opportunities for Customers Bancorp and First Merchants
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Customers and First is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Customers Bancorp and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Customers Bancorp 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 Customers Bancorp 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 Customers Bancorp i.e., Customers Bancorp and First Merchants go up and down completely randomly.
Pair Corralation between Customers Bancorp and First Merchants
Given the investment horizon of 90 days Customers Bancorp is expected to generate 3.3 times more return on investment than First Merchants. However, Customers Bancorp is 3.3 times more volatile than First Merchants. It trades about 0.13 of its potential returns per unit of risk. First Merchants is currently generating about 0.02 per unit of risk. If you would invest 4,771 in Customers Bancorp on October 21, 2024 and sell it today you would earn a total of 229.00 from holding Customers Bancorp or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Customers Bancorp vs. First Merchants
Performance |
| Timeline |
| Customers Bancorp |
| First Merchants |
Customers Bancorp and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Customers Bancorp and First Merchants
The main advantage of trading using opposite Customers Bancorp and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Customers Bancorp 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.| Customers Bancorp vs. Glacier Bancorp | Customers Bancorp vs. Capitol Federal Financial | Customers Bancorp vs. Byline Bancorp | Customers Bancorp vs. Cathay General Bancorp |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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