Correlation Between Mercantile Bank and Northfield Bancorp
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and Northfield Bancorp 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 Northfield Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercantile Bank and Northfield Bancorp, you can compare the effects of market volatilities on Mercantile Bank and Northfield Bancorp 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 Northfield Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and Northfield Bancorp.
Diversification Opportunities for Mercantile Bank and Northfield Bancorp
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mercantile and Northfield is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and Northfield Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northfield 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 Northfield Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northfield Bancorp has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and Northfield Bancorp go up and down completely randomly.
Pair Corralation between Mercantile Bank and Northfield Bancorp
Given the investment horizon of 90 days Mercantile Bank is expected to generate 1.08 times less return on investment than Northfield Bancorp. But when comparing it to its historical volatility, Mercantile Bank is 1.02 times less risky than Northfield Bancorp. It trades about 0.18 of its potential returns per unit of risk. Northfield Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,186 in Northfield Bancorp on August 27, 2024 and sell it today you would earn a total of 201.00 from holding Northfield Bancorp or generate 16.95% 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. Northfield Bancorp
Performance |
| Timeline |
| Mercantile Bank |
| Northfield Bancorp |
Mercantile Bank and Northfield Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Bank and Northfield Bancorp
The main advantage of trading using opposite Mercantile Bank and Northfield Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, Northfield Bancorp 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 Northfield Bancorp will offset losses from the drop in Northfield Bancorp'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 |
| Northfield Bancorp vs. Finward Bancorp | Northfield Bancorp vs. Community West Bancshares | Northfield Bancorp vs. First Financial Northwest | Northfield Bancorp vs. Home 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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