Correlation Between First Merchants and Associated Banc
Can any of the company-specific risk be diversified away by investing in both First Merchants and Associated Banc 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 Associated Banc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Associated Banc Corp, you can compare the effects of market volatilities on First Merchants and Associated Banc 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 Associated Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Associated Banc.
Diversification Opportunities for First Merchants and Associated Banc
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Associated is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Associated Banc Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Banc Corp 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 Associated Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Banc Corp has no effect on the direction of First Merchants i.e., First Merchants and Associated Banc go up and down completely randomly.
Pair Corralation between First Merchants and Associated Banc
Assuming the 90 days horizon First Merchants is expected to generate 0.73 times more return on investment than Associated Banc. However, First Merchants is 1.37 times less risky than Associated Banc. It trades about 0.03 of its potential returns per unit of risk. Associated Banc Corp is currently generating about 0.02 per unit of risk. If you would invest 2,201 in First Merchants on August 23, 2024 and sell it today you would earn a total of 334.00 from holding First Merchants or generate 15.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Merchants vs. Associated Banc Corp
Performance |
| Timeline |
| First Merchants |
| Associated Banc Corp |
First Merchants and Associated Banc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Associated Banc
The main advantage of trading using opposite First Merchants and Associated Banc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Associated Banc 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 Associated Banc will offset losses from the drop in Associated Banc's long position.| First Merchants vs. Heartland Financial USA | First Merchants vs. OceanFirst Financial Corp | First Merchants vs. Old National Bancorp | First Merchants vs. Old National Bancorp |
| Associated Banc vs. Truist Financial | Associated Banc vs. US Bancorp | Associated Banc vs. Truist Financial | Associated Banc vs. MetLife Preferred Stock |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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