Correlation Between OFG Bancorp and First Merchants
Can any of the company-specific risk be diversified away by investing in both OFG Bancorp and First Merchants 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 OFG Bancorp and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OFG Bancorp and First Merchants, you can compare the effects of market volatilities on OFG Bancorp and First Merchants 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 OFG Bancorp with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFG Bancorp and First Merchants.
Diversification Opportunities for OFG Bancorp and First Merchants
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between OFG and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding OFG Bancorp and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and OFG Bancorp 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 OFG Bancorp are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of OFG Bancorp i.e., OFG Bancorp and First Merchants go up and down completely randomly.
Pair Corralation between OFG Bancorp and First Merchants
Considering the 90-day investment horizon OFG Bancorp is expected to generate 0.89 times more return on investment than First Merchants. However, OFG Bancorp is 1.12 times less risky than First Merchants. It trades about 0.07 of its potential returns per unit of risk. First Merchants is currently generating about 0.02 per unit of risk. 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 |
OFG Bancorp vs. First Merchants
Performance |
| Timeline |
| OFG Bancorp |
| First Merchants |
OFG Bancorp and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OFG Bancorp and First Merchants
The main advantage of trading using opposite OFG Bancorp and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFG Bancorp position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.| OFG Bancorp vs. Popular | OFG Bancorp vs. The First Bancshares, | OFG Bancorp vs. First Commonwealth Financial | OFG Bancorp vs. First Bancorp |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. MT Bank |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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