Correlation Between Midland States and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Midland States and Merchants 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 Midland States and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midland States Bancorp and Merchants Bancorp, you can compare the effects of market volatilities on Midland States and Merchants 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 Midland States with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midland States and Merchants Bancorp.
Diversification Opportunities for Midland States and Merchants Bancorp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Midland and Merchants is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Midland States Bancorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Midland States 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 Midland States Bancorp are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Midland States i.e., Midland States and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Midland States and Merchants Bancorp
Assuming the 90 days horizon Midland States is expected to generate 3.67 times less return on investment than Merchants Bancorp. But when comparing it to its historical volatility, Midland States Bancorp is 2.73 times less risky than Merchants Bancorp. It trades about 0.07 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,113 in Merchants Bancorp on August 25, 2024 and sell it today you would earn a total of 149.00 from holding Merchants Bancorp or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midland States Bancorp vs. Merchants Bancorp
Performance |
| Timeline |
| Midland States Bancorp |
| Merchants Bancorp |
Midland States and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midland States and Merchants Bancorp
The main advantage of trading using opposite Midland States and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midland States position performs unexpectedly, Merchants 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| Midland States vs. Texas Capital Bancshares | Midland States vs. Merchants Bancorp | Midland States vs. Wintrust Financial Corp |
| Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Bank of America | Merchants Bancorp vs. KeyCorp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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