Correlation Between Merchants Bancorp and RBB Bancorp
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and RBB Bancorp 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 Merchants Bancorp and RBB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and RBB Bancorp, you can compare the effects of market volatilities on Merchants Bancorp and RBB Bancorp 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 Merchants Bancorp with a short position of RBB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and RBB Bancorp.
Diversification Opportunities for Merchants Bancorp and RBB Bancorp
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merchants and RBB is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and RBB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBB Bancorp and Merchants Bancorp 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 Merchants Bancorp are associated (or correlated) with RBB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBB Bancorp has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and RBB Bancorp go up and down completely randomly.
Pair Corralation between Merchants Bancorp and RBB Bancorp
Given the investment horizon of 90 days Merchants Bancorp is expected to generate 1.12 times more return on investment than RBB Bancorp. However, Merchants Bancorp is 1.12 times more volatile than RBB Bancorp. It trades about 0.35 of its potential returns per unit of risk. RBB Bancorp is currently generating about -0.16 per unit of risk. If you would invest 3,600 in Merchants Bancorp on November 3, 2024 and sell it today you would earn a total of 593.00 from holding Merchants Bancorp or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merchants Bancorp vs. RBB Bancorp
Performance |
| Timeline |
| Merchants Bancorp |
| RBB Bancorp |
Merchants Bancorp and RBB Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and RBB Bancorp
The main advantage of trading using opposite Merchants Bancorp and RBB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, RBB Bancorp 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 RBB Bancorp will offset losses from the drop in RBB Bancorp's long position.| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
| RBB Bancorp vs. OP Bancorp | RBB Bancorp vs. Hanmi Financial | RBB Bancorp vs. Hope Bancorp | RBB Bancorp vs. Northeast Bancorp |
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 Stocks Directory module to find actively traded stocks across global markets.
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