Correlation Between Mercantile Bank and Capitol Federal
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and Capitol Federal 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 Mercantile Bank and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercantile Bank and Capitol Federal Financial, you can compare the effects of market volatilities on Mercantile Bank and Capitol Federal 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 Mercantile Bank with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and Capitol Federal.
Diversification Opportunities for Mercantile Bank and Capitol Federal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mercantile and Capitol is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and Mercantile Bank 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 Mercantile Bank are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and Capitol Federal go up and down completely randomly.
Pair Corralation between Mercantile Bank and Capitol Federal
Given the investment horizon of 90 days Mercantile Bank is expected to generate 1.43 times more return on investment than Capitol Federal. However, Mercantile Bank is 1.43 times more volatile than Capitol Federal Financial. It trades about 0.14 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.06 per unit of risk. If you would invest 4,380 in Mercantile Bank on August 24, 2024 and sell it today you would earn a total of 524.00 from holding Mercantile Bank or generate 11.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercantile Bank vs. Capitol Federal Financial
Performance |
| Timeline |
| Mercantile Bank |
| Capitol Federal Financial |
Mercantile Bank and Capitol Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Bank and Capitol Federal
The main advantage of trading using opposite Mercantile Bank and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.| Mercantile Bank vs. Great Southern Bancorp | Mercantile Bank vs. First Bancorp | Mercantile Bank vs. MidWestOne Financial Group | Mercantile Bank vs. Lakeland Financial |
| Capitol Federal vs. Independent Bank | Capitol Federal vs. BankFinancial | Capitol Federal vs. Business First Bancshares | Capitol Federal vs. First 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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