Correlation Between VersaBank and First Merchants
Can any of the company-specific risk be diversified away by investing in both VersaBank and First Merchants 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 VersaBank and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and First Merchants, you can compare the effects of market volatilities on VersaBank and First Merchants 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 VersaBank with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and First Merchants.
Diversification Opportunities for VersaBank and First Merchants
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VersaBank and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and VersaBank 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 VersaBank are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of VersaBank i.e., VersaBank and First Merchants go up and down completely randomly.
Pair Corralation between VersaBank and First Merchants
Given the investment horizon of 90 days VersaBank is expected to generate 2.8 times more return on investment than First Merchants. However, VersaBank is 2.8 times more volatile than First Merchants. It trades about 0.43 of its potential returns per unit of risk. First Merchants is currently generating about 0.07 per unit of risk. If you would invest 1,475 in VersaBank on August 28, 2024 and sell it today you would earn a total of 284.00 from holding VersaBank or generate 19.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. First Merchants
Performance |
| Timeline |
| VersaBank |
| First Merchants |
VersaBank and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and First Merchants
The main advantage of trading using opposite VersaBank and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.| VersaBank vs. Fifth Third Bancorp | VersaBank vs. Zions Bancorporation | VersaBank vs. Huntington Bancshares Incorporated | VersaBank vs. Comerica |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Zions Bancorporation | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. Comerica |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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