Correlation Between Merchants Bancorp and First Citizens
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and First Citizens 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 First Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and First Citizens BancShares, you can compare the effects of market volatilities on Merchants Bancorp and First Citizens 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 First Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and First Citizens.
Diversification Opportunities for Merchants Bancorp and First Citizens
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merchants and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and First Citizens BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Citizens BancShares 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 First Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Citizens BancShares has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and First Citizens go up and down completely randomly.
Pair Corralation between Merchants Bancorp and First Citizens
Assuming the 90 days horizon Merchants Bancorp is expected to generate 0.1 times more return on investment than First Citizens. However, Merchants Bancorp is 9.81 times less risky than First Citizens. It trades about 0.24 of its potential returns per unit of risk. First Citizens BancShares is currently generating about -0.01 per unit of risk. If you would invest 2,520 in Merchants Bancorp on August 27, 2024 and sell it today you would earn a total of 21.00 from holding Merchants Bancorp or generate 0.83% 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. First Citizens BancShares
Performance |
| Timeline |
| Merchants Bancorp |
| First Citizens BancShares |
Merchants Bancorp and First Citizens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and First Citizens
The main advantage of trading using opposite Merchants Bancorp and First Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, First Citizens 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 Citizens will offset losses from the drop in First Citizens' long position.| Merchants Bancorp vs. Medallion Bank PR | Merchants Bancorp vs. Northern Trust | Merchants Bancorp vs. Valley National Bancorp | Merchants Bancorp vs. Valley National Bancorp |
| First Citizens vs. Fifth Third Bancorp | First Citizens vs. Dime Community Bancshares | First Citizens vs. Fifth Third Bancorp | First Citizens vs. Northern Trust |
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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