Correlation Between Merchants Bancorp and Northern Trust
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and Northern Trust 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 Northern Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and Northern Trust, you can compare the effects of market volatilities on Merchants Bancorp and Northern Trust 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 Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Northern Trust.
Diversification Opportunities for Merchants Bancorp and Northern Trust
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merchants and Northern is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust 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 Northern Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Trust has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Northern Trust go up and down completely randomly.
Pair Corralation between Merchants Bancorp and Northern Trust
Assuming the 90 days horizon Merchants Bancorp is expected to generate 0.13 times more return on investment than Northern Trust. However, Merchants Bancorp is 7.63 times less risky than Northern Trust. It trades about 0.26 of its potential returns per unit of risk. Northern Trust is currently generating about -0.17 per unit of risk. If you would invest 2,515 in Merchants Bancorp on August 24, 2024 and sell it today you would earn a total of 24.00 from holding Merchants Bancorp or generate 0.95% 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. Northern Trust
Performance |
| Timeline |
| Merchants Bancorp |
| Northern Trust |
Merchants Bancorp and Northern Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and Northern Trust
The main advantage of trading using opposite Merchants Bancorp and Northern Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, Northern Trust 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 Northern Trust will offset losses from the drop in Northern Trust's 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 |
| Northern Trust vs. The Gabelli Equity | Northern Trust vs. The Gabelli Multimedia | Northern Trust vs. The Gabelli Equity | Northern Trust vs. Virtus AllianzGI Convertible |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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