Correlation Between First Merchants and Texas Capital
Can any of the company-specific risk be diversified away by investing in both First Merchants and Texas Capital 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 Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Texas Capital Bancshares, you can compare the effects of market volatilities on First Merchants and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Texas Capital.
Diversification Opportunities for First Merchants and Texas Capital
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Texas is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of First Merchants i.e., First Merchants and Texas Capital go up and down completely randomly.
Pair Corralation between First Merchants and Texas Capital
Assuming the 90 days horizon First Merchants is expected to generate 0.43 times more return on investment than Texas Capital. However, First Merchants is 2.35 times less risky than Texas Capital. It trades about 0.08 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about -0.04 per unit of risk. If you would invest 2,487 in First Merchants on September 12, 2024 and sell it today you would earn a total of 63.00 from holding First Merchants or generate 2.53% 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. Texas Capital Bancshares
Performance |
| Timeline |
| First Merchants |
| Texas Capital Bancshares |
First Merchants and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Texas Capital
The main advantage of trading using opposite First Merchants and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital'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 |
| Texas Capital vs. Capital One Financial | Texas Capital vs. Capital One Financial | Texas Capital vs. Bank of America |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |