Correlation Between First Merchants and Great Southern
Can any of the company-specific risk be diversified away by investing in both First Merchants and Great Southern 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 First Merchants and Great Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Great Southern Bancorp, you can compare the effects of market volatilities on First Merchants and Great Southern 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 First Merchants with a short position of Great Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Great Southern.
Diversification Opportunities for First Merchants and Great Southern
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Great is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Great Southern Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Southern Bancorp and First Merchants 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 First Merchants are associated (or correlated) with Great Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Southern Bancorp has no effect on the direction of First Merchants i.e., First Merchants and Great Southern go up and down completely randomly.
Pair Corralation between First Merchants and Great Southern
Given the investment horizon of 90 days First Merchants is expected to generate 1.02 times more return on investment than Great Southern. However, First Merchants is 1.02 times more volatile than Great Southern Bancorp. It trades about 0.26 of its potential returns per unit of risk. Great Southern Bancorp is currently generating about 0.14 per unit of risk. If you would invest 3,716 in First Merchants on August 28, 2024 and sell it today you would earn a total of 781.00 from holding First Merchants or generate 21.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Merchants vs. Great Southern Bancorp
Performance |
| Timeline |
| First Merchants |
| Great Southern Bancorp |
First Merchants and Great Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Great Southern
The main advantage of trading using opposite First Merchants and Great Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Great Southern 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 Great Southern will offset losses from the drop in Great Southern's long position.| First Merchants vs. Home Bancorp | First Merchants vs. HomeTrust Bancshares | First Merchants vs. Great Southern Bancorp | First Merchants vs. Finward Bancorp |
| Great Southern vs. First Northwest Bancorp | Great Southern vs. Community West Bancshares | Great Southern vs. First Financial Northwest | Great Southern vs. First Capital |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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