Correlation Between Mercantile Bank and OFG Bancorp
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and OFG 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 OFG 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 OFG Bancorp, you can compare the effects of market volatilities on Mercantile Bank and OFG 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 OFG Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and OFG Bancorp.
Diversification Opportunities for Mercantile Bank and OFG Bancorp
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mercantile and OFG is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and OFG Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFG 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 OFG Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFG Bancorp has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and OFG Bancorp go up and down completely randomly.
Pair Corralation between Mercantile Bank and OFG Bancorp
Given the investment horizon of 90 days Mercantile Bank is expected to generate 1.08 times less return on investment than OFG Bancorp. In addition to that, Mercantile Bank is 1.26 times more volatile than OFG Bancorp. It trades about 0.05 of its total potential returns per unit of risk. OFG Bancorp is currently generating about 0.07 per unit of volatility. If you would invest 2,544 in OFG Bancorp on August 29, 2024 and sell it today you would earn a total of 2,068 from holding OFG Bancorp or generate 81.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercantile Bank vs. OFG Bancorp
Performance |
| Timeline |
| Mercantile Bank |
| OFG Bancorp |
Mercantile Bank and OFG Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Bank and OFG Bancorp
The main advantage of trading using opposite Mercantile Bank and OFG Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, OFG 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 OFG Bancorp will offset losses from the drop in OFG 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 |
| OFG Bancorp vs. Popular | OFG Bancorp vs. The First Bancshares, | OFG Bancorp vs. First Commonwealth Financial | OFG Bancorp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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