Correlation Between Rocket Companies and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Rocket Companies 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 Rocket Companies and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Companies and Merchants Bancorp, you can compare the effects of market volatilities on Rocket Companies 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 Rocket Companies with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Companies and Merchants Bancorp.
Diversification Opportunities for Rocket Companies and Merchants Bancorp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rocket and Merchants is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Rocket Companies 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 Rocket Companies 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 Rocket Companies i.e., Rocket Companies and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Rocket Companies and Merchants Bancorp
Considering the 90-day investment horizon Rocket Companies is expected to generate 0.96 times more return on investment than Merchants Bancorp. However, Rocket Companies is 1.04 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 per unit of risk. If you would invest 1,467 in Rocket Companies on October 22, 2024 and sell it today you would lose (280.00) from holding Rocket Companies or give up 19.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Companies vs. Merchants Bancorp
Performance |
| Timeline |
| Rocket Companies |
| Merchants Bancorp |
Rocket Companies and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Companies and Merchants Bancorp
The main advantage of trading using opposite Rocket Companies and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Companies 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.| Rocket Companies vs. Loandepot | Rocket Companies vs. Mr Cooper Group | Rocket Companies vs. PennyMac Finl Svcs | Rocket Companies vs. Guild Holdings Co |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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