Correlation Between Wintrust Financial and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Wintrust Financial 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 Wintrust Financial and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wintrust Financial Corp and Merchants Bancorp, you can compare the effects of market volatilities on Wintrust Financial 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 Wintrust Financial with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wintrust Financial and Merchants Bancorp.
Diversification Opportunities for Wintrust Financial and Merchants Bancorp
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wintrust and Merchants is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Wintrust Financial Corp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Corp 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 Wintrust Financial i.e., Wintrust Financial and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Wintrust Financial and Merchants Bancorp
Assuming the 90 days horizon Wintrust Financial Corp is expected to generate 1.61 times more return on investment than Merchants Bancorp. However, Wintrust Financial is 1.61 times more volatile than Merchants Bancorp. It trades about 0.11 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.16 per unit of risk. If you would invest 2,363 in Wintrust Financial Corp on August 25, 2024 and sell it today you would earn a total of 147.00 from holding Wintrust Financial Corp or generate 6.22% 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 Corp vs. Merchants Bancorp
Performance |
| Timeline |
| Wintrust Financial Corp |
| Merchants Bancorp |
Wintrust Financial and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wintrust Financial and Merchants Bancorp
The main advantage of trading using opposite Wintrust Financial and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wintrust Financial 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.| Wintrust Financial vs. Merchants Bancorp | Wintrust Financial vs. Merchants Bancorp | Wintrust Financial vs. Merchants Bancorp | Wintrust Financial vs. Merchants Bancorp |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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