Correlation Between Mercantile Bank and Luther Burbank
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and Luther Burbank 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 Luther Burbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercantile Bank and Luther Burbank, you can compare the effects of market volatilities on Mercantile Bank and Luther Burbank 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 Luther Burbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and Luther Burbank.
Diversification Opportunities for Mercantile Bank and Luther Burbank
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mercantile and Luther is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and Luther Burbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luther Burbank 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 Luther Burbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luther Burbank has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and Luther Burbank go up and down completely randomly.
Pair Corralation between Mercantile Bank and Luther Burbank
If you would invest 4,377 in Mercantile Bank on August 25, 2024 and sell it today you would earn a total of 662.00 from holding Mercantile Bank or generate 15.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.35% |
| Values | Daily Returns |
Mercantile Bank vs. Luther Burbank
Performance |
| Timeline |
| Mercantile Bank |
| Luther Burbank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Mercantile Bank and Luther Burbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Bank and Luther Burbank
The main advantage of trading using opposite Mercantile Bank and Luther Burbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, Luther Burbank 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 Luther Burbank will offset losses from the drop in Luther Burbank'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 |
| Luther Burbank vs. First Community | Luther Burbank vs. Community West Bancshares | Luther Burbank vs. First Financial Northwest | Luther Burbank vs. First Northwest 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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