Correlation Between Mercantile Bank and German American
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and German American 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 German American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercantile Bank and German American Bancorp, you can compare the effects of market volatilities on Mercantile Bank and German American 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 German American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and German American.
Diversification Opportunities for Mercantile Bank and German American
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mercantile and German is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and German American Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on German American Bancorp 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 German American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of German American Bancorp has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and German American go up and down completely randomly.
Pair Corralation between Mercantile Bank and German American
Given the investment horizon of 90 days Mercantile Bank is expected to generate 1.12 times less return on investment than German American. In addition to that, Mercantile Bank is 1.46 times more volatile than German American Bancorp. It trades about 0.1 of its total potential returns per unit of risk. German American Bancorp is currently generating about 0.16 per unit of volatility. If you would invest 3,168 in German American Bancorp on August 25, 2024 and sell it today you would earn a total of 1,428 from holding German American Bancorp or generate 45.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercantile Bank vs. German American Bancorp
Performance |
| Timeline |
| Mercantile Bank |
| German American Bancorp |
Mercantile Bank and German American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Bank and German American
The main advantage of trading using opposite Mercantile Bank and German American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, German American 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 German American will offset losses from the drop in German American'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 |
| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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