Correlation Between Veritex Holdings and First Merchants
Can any of the company-specific risk be diversified away by investing in both Veritex Holdings 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 Veritex Holdings and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veritex Holdings and First Merchants, you can compare the effects of market volatilities on Veritex Holdings 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 Veritex Holdings with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veritex Holdings and First Merchants.
Diversification Opportunities for Veritex Holdings and First Merchants
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Veritex and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings i.e., Veritex Holdings and First Merchants go up and down completely randomly.
Pair Corralation between Veritex Holdings and First Merchants
Given the investment horizon of 90 days Veritex Holdings is expected to generate 2.89 times more return on investment than First Merchants. However, Veritex Holdings is 2.89 times more volatile than First Merchants. It trades about 0.1 of its potential returns per unit of risk. First Merchants is currently generating about 0.07 per unit of risk. If you would invest 1,835 in Veritex Holdings on August 24, 2024 and sell it today you would earn a total of 1,176 from holding Veritex Holdings or generate 64.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Veritex Holdings vs. First Merchants
Performance |
| Timeline |
| Veritex Holdings |
| First Merchants |
Veritex Holdings and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Veritex Holdings and First Merchants
The main advantage of trading using opposite Veritex Holdings and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veritex Holdings 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.| Veritex Holdings vs. Finward Bancorp | Veritex Holdings vs. Franklin Financial Services | Veritex Holdings vs. Home Bancorp | Veritex Holdings vs. LINKBANCORP |
| First Merchants vs. Banco Bradesco SA | First Merchants vs. Itau Unibanco Banco | First Merchants vs. Banco Santander Brasil | First Merchants vs. Western Alliance Bancorporation |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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