Correlation Between RBB Bancorp and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both RBB 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 RBB 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 RBB Bancorp and Merchants Bancorp, you can compare the effects of market volatilities on RBB 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 RBB Bancorp with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBB Bancorp and Merchants Bancorp.
Diversification Opportunities for RBB Bancorp and Merchants Bancorp
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RBB and Merchants is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding RBB Bancorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and RBB 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 RBB 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 RBB Bancorp i.e., RBB Bancorp and Merchants Bancorp go up and down completely randomly.
Pair Corralation between RBB Bancorp and Merchants Bancorp
Considering the 90-day investment horizon RBB Bancorp is expected to under-perform the Merchants Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, RBB Bancorp is 1.12 times less risky than Merchants Bancorp. The stock trades about -0.16 of its potential returns per unit of risk. The Merchants Bancorp is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,600 in Merchants Bancorp on November 3, 2024 and sell it today you would earn a total of 593.00 from holding Merchants Bancorp or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBB Bancorp vs. Merchants Bancorp
Performance |
| Timeline |
| RBB Bancorp |
| Merchants Bancorp |
RBB Bancorp and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBB Bancorp and Merchants Bancorp
The main advantage of trading using opposite RBB Bancorp and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBB 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.| RBB Bancorp vs. OP Bancorp | RBB Bancorp vs. Hanmi Financial | RBB Bancorp vs. Hope Bancorp | RBB Bancorp vs. Northeast Bancorp |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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