Correlation Between Luther Burbank and First Merchants
Can any of the company-specific risk be diversified away by investing in both Luther Burbank 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 Luther Burbank and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luther Burbank and First Merchants, you can compare the effects of market volatilities on Luther Burbank 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 Luther Burbank with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luther Burbank and First Merchants.
Diversification Opportunities for Luther Burbank and First Merchants
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Luther and First is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Luther Burbank and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Luther Burbank 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 Luther Burbank 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 Luther Burbank i.e., Luther Burbank and First Merchants go up and down completely randomly.
Pair Corralation between Luther Burbank and First Merchants
Considering the 90-day investment horizon Luther Burbank is expected to under-perform the First Merchants. In addition to that, Luther Burbank is 1.11 times more volatile than First Merchants. It trades about -0.02 of its total potential returns per unit of risk. First Merchants is currently generating about 0.02 per unit of volatility. If you would invest 3,883 in First Merchants on August 29, 2024 and sell it today you would earn a total of 546.00 from holding First Merchants or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.52% |
| Values | Daily Returns |
Luther Burbank vs. First Merchants
Performance |
| Timeline |
| Luther Burbank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Merchants |
Luther Burbank and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luther Burbank and First Merchants
The main advantage of trading using opposite Luther Burbank and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luther Burbank 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.| Luther Burbank vs. First Community | Luther Burbank vs. Community West Bancshares | Luther Burbank vs. First Financial Northwest | Luther Burbank vs. First Northwest Bancorp |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. MT Bank |
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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