Correlation Between Texas Capital and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Texas Capital 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 Texas Capital and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Capital Bancshares and Merchants Bancorp, you can compare the effects of market volatilities on Texas Capital 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 Texas Capital with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Merchants Bancorp.
Diversification Opportunities for Texas Capital and Merchants Bancorp
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Texas and Merchants is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Texas Capital 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 Texas Capital Bancshares 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 Texas Capital i.e., Texas Capital and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Texas Capital and Merchants Bancorp
Assuming the 90 days horizon Texas Capital is expected to generate 1.32 times less return on investment than Merchants Bancorp. In addition to that, Texas Capital is 1.73 times more volatile than Merchants Bancorp. It trades about 0.04 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about 0.08 per unit of volatility. If you would invest 2,289 in Merchants Bancorp on November 1, 2024 and sell it today you would earn a total of 309.00 from holding Merchants Bancorp or generate 13.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.56% |
| Values | Daily Returns |
Texas Capital Bancshares vs. Merchants Bancorp
Performance |
| Timeline |
| Texas Capital Bancshares |
| Merchants Bancorp |
Texas Capital and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Merchants Bancorp
The main advantage of trading using opposite Texas Capital and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital 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.| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
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.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |