Correlation Between Merchants Bancorp and Wintrust Financial
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and Wintrust 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 Merchants Bancorp and Wintrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and Wintrust Financial Corp, you can compare the effects of market volatilities on Merchants Bancorp and Wintrust 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 Merchants Bancorp with a short position of Wintrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Wintrust Financial.
Diversification Opportunities for Merchants Bancorp and Wintrust Financial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merchants and Wintrust is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Wintrust Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintrust Financial Corp 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 Wintrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintrust Financial Corp has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Wintrust Financial go up and down completely randomly.
Pair Corralation between Merchants Bancorp and Wintrust Financial
Assuming the 90 days horizon Merchants Bancorp is expected to generate 1.25 times more return on investment than Wintrust Financial. However, Merchants Bancorp is 1.25 times more volatile than Wintrust Financial Corp. It trades about 0.03 of its potential returns per unit of risk. Wintrust Financial Corp is currently generating about 0.03 per unit of risk. If you would invest 2,273 in Merchants Bancorp on August 29, 2024 and sell it today you would earn a total of 335.00 from holding Merchants Bancorp or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merchants Bancorp vs. Wintrust Financial Corp
Performance |
| Timeline |
| Merchants Bancorp |
| Wintrust Financial Corp |
Merchants Bancorp and Wintrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and Wintrust Financial
The main advantage of trading using opposite Merchants Bancorp and Wintrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, Wintrust 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 Wintrust Financial will offset losses from the drop in Wintrust Financial's long position.| Merchants Bancorp vs. Merchants Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. Merchants Bancorp |
| Wintrust Financial vs. Capital One Financial | Wintrust Financial vs. Capital One Financial | Wintrust Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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