Correlation Between Wintrust Financial and First Merchants
Can any of the company-specific risk be diversified away by investing in both Wintrust Financial 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 Wintrust Financial and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wintrust Financial and First Merchants, you can compare the effects of market volatilities on Wintrust Financial 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 Wintrust Financial with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wintrust Financial and First Merchants.
Diversification Opportunities for Wintrust Financial and First Merchants
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wintrust and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wintrust Financial and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Wintrust Financial 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 Wintrust Financial 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 Wintrust Financial i.e., Wintrust Financial and First Merchants go up and down completely randomly.
Pair Corralation between Wintrust Financial and First Merchants
Given the investment horizon of 90 days Wintrust Financial is expected to generate 0.96 times more return on investment than First Merchants. However, Wintrust Financial is 1.04 times less risky than First Merchants. It trades about 0.06 of its potential returns per unit of risk. First Merchants is currently generating about 0.02 per unit of risk. If you would invest 8,384 in Wintrust Financial on August 29, 2024 and sell it today you would earn a total of 5,405 from holding Wintrust Financial or generate 64.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wintrust Financial vs. First Merchants
Performance |
| Timeline |
| Wintrust Financial |
| First Merchants |
Wintrust Financial and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wintrust Financial and First Merchants
The main advantage of trading using opposite Wintrust Financial and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wintrust Financial 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.| Wintrust Financial vs. Fifth Third Bancorp | Wintrust Financial vs. Huntington Bancshares Incorporated | Wintrust Financial vs. MT Bank |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. MT Bank |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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