Correlation Between Plumas Bancorp and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Plumas Bancorp 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 Plumas Bancorp and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plumas Bancorp and Merchants Bancorp, you can compare the effects of market volatilities on Plumas Bancorp 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 Plumas Bancorp with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumas Bancorp and Merchants Bancorp.
Diversification Opportunities for Plumas Bancorp and Merchants Bancorp
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Plumas and Merchants is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Plumas Bancorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Plumas 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 Plumas 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 Plumas Bancorp i.e., Plumas Bancorp and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Plumas Bancorp and Merchants Bancorp
Given the investment horizon of 90 days Plumas Bancorp is expected to generate 1.4 times less return on investment than Merchants Bancorp. But when comparing it to its historical volatility, Plumas Bancorp is 1.14 times less risky than Merchants Bancorp. It trades about 0.04 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,561 in Merchants Bancorp on December 1, 2024 and sell it today you would earn a total of 1,511 from holding Merchants Bancorp or generate 59.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plumas Bancorp vs. Merchants Bancorp
Performance |
| Timeline |
| Plumas Bancorp |
| Merchants Bancorp |
Plumas Bancorp and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plumas Bancorp and Merchants Bancorp
The main advantage of trading using opposite Plumas Bancorp and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plumas Bancorp 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.| Plumas Bancorp vs. Home Federal Bancorp | Plumas Bancorp vs. First Northwest Bancorp | Plumas Bancorp vs. Lake Shore Bancorp | Plumas Bancorp vs. Community West Bancshares |
| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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