Correlation Between US Bancorp and Merchants Marine
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Merchants Marine 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 US Bancorp and Merchants Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp PERP and Merchants Marine Bancorp, you can compare the effects of market volatilities on US Bancorp and Merchants Marine 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 US Bancorp with a short position of Merchants Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Merchants Marine.
Diversification Opportunities for US Bancorp and Merchants Marine
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between USB-PA and Merchants is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp PERP and Merchants Marine Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Marine Bancorp and US 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 US Bancorp PERP are associated (or correlated) with Merchants Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Marine Bancorp has no effect on the direction of US Bancorp i.e., US Bancorp and Merchants Marine go up and down completely randomly.
Pair Corralation between US Bancorp and Merchants Marine
Assuming the 90 days trading horizon US Bancorp PERP is expected to generate 0.54 times more return on investment than Merchants Marine. However, US Bancorp PERP is 1.85 times less risky than Merchants Marine. It trades about 0.15 of its potential returns per unit of risk. Merchants Marine Bancorp is currently generating about -0.09 per unit of risk. If you would invest 86,740 in US Bancorp PERP on September 1, 2024 and sell it today you would earn a total of 2,030 from holding US Bancorp PERP or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp PERP vs. Merchants Marine Bancorp
Performance |
| Timeline |
| US Bancorp PERP |
| Merchants Marine Bancorp |
US Bancorp and Merchants Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Merchants Marine
The main advantage of trading using opposite US Bancorp and Merchants Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Merchants Marine 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 Marine will offset losses from the drop in Merchants Marine's long position.The idea behind US Bancorp PERP and Merchants Marine Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Merchants Marine vs. Mission Valley Bancorp | Merchants Marine vs. Harbor Bankshares | Merchants Marine vs. Oconee Financial | Merchants Marine vs. MF Bancorp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |