Correlation Between First Merchants and Triumph Financial
Can any of the company-specific risk be diversified away by investing in both First Merchants and Triumph Financial 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 Triumph Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Merchants and Triumph Financial, you can compare the effects of market volatilities on First Merchants and Triumph Financial 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 Triumph Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Triumph Financial.
Diversification Opportunities for First Merchants and Triumph Financial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Triumph is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Triumph Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph Financial 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 Triumph Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Financial has no effect on the direction of First Merchants i.e., First Merchants and Triumph Financial go up and down completely randomly.
Pair Corralation between First Merchants and Triumph Financial
Assuming the 90 days horizon First Merchants is expected to generate 0.53 times more return on investment than Triumph Financial. However, First Merchants is 1.89 times less risky than Triumph Financial. It trades about 0.07 of its potential returns per unit of risk. Triumph Financial is currently generating about -0.01 per unit of risk. If you would invest 2,528 in First Merchants on August 27, 2024 and sell it today you would earn a total of 25.00 from holding First Merchants or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Merchants vs. Triumph Financial
Performance |
| Timeline |
| First Merchants |
| Triumph Financial |
First Merchants and Triumph Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Triumph Financial
The main advantage of trading using opposite First Merchants and Triumph Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Triumph Financial 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 Triumph Financial will offset losses from the drop in Triumph Financial's long position.| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Zions Bancorporation | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. PNC Financial Services |
| Triumph Financial vs. Triumph Financial | Triumph Financial vs. Wintrust Financial Corp | Triumph Financial vs. First Merchants | Triumph Financial vs. Pinnacle Financial Partners |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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