Correlation Between Merchants Bancorp and Midland States
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and Midland States 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 Midland States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and Midland States Bancorp, you can compare the effects of market volatilities on Merchants Bancorp and Midland States 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 Midland States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Midland States.
Diversification Opportunities for Merchants Bancorp and Midland States
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merchants and Midland is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Midland States Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midland States 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 Midland States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midland States Bancorp has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Midland States go up and down completely randomly.
Pair Corralation between Merchants Bancorp and Midland States
Assuming the 90 days horizon Merchants Bancorp is expected to generate 1.66 times less return on investment than Midland States. In addition to that, Merchants Bancorp is 1.78 times more volatile than Midland States Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Midland States Bancorp is currently generating about 0.15 per unit of volatility. If you would invest 2,502 in Midland States Bancorp on August 29, 2024 and sell it today you would earn a total of 38.00 from holding Midland States Bancorp or generate 1.52% 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. Midland States Bancorp
Performance |
| Timeline |
| Merchants Bancorp |
| Midland States Bancorp |
Merchants Bancorp and Midland States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and Midland States
The main advantage of trading using opposite Merchants Bancorp and Midland States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, Midland States 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 Midland States will offset losses from the drop in Midland States' long position.| Merchants Bancorp vs. Merchants Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. Merchants Bancorp |
| Midland States vs. Fifth Third Bancorp | Midland States vs. Huntington Bancshares Incorporated | Midland States 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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